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MONEY

Spain to slap windfall taxes on banks, energy firms

The Spanish government said Tuesday it will slap temporary taxes on banks and energy firms to cover the cost of state measures put in place to help Spaniards grapple with soaring inflation.

Published: 12 July 2022 17:55 CEST
Spain to slap windfall taxes on banks, energy firms
Spain's Prime Minister Pedro Sanchez delivers a speech during the parliamentary debate on the State of the Nation, at the Congress of Deputies in Madrid on July 12, 2022. Photo by PIERRE-PHILIPPE MARCOU / AFP

The new taxes should generate around 7.0 billion euros ($7.0 billion) in revenues in 2023 and 2024, Socialist Prime Minister Pedro Sanchez told parliament in a state of the nation speech.

They will include a tax on windfall profits of big energy firms, which will generate around 2.0 billion euros per year for state coffers, he said.

A tax on lenders, “who have started to benefit from higher interest rates”, will bring in 1.5 billion euros per year, he added.

The profits generated by rising prices “must be returned to citizens” instead of “fattening” the “salaries of big business leaders,” Sanchez said.

“This government will not tolerate that companies profit from the crisis to enrich themselves,” he added.

Countries around the world are experiencing decades-high inflation as the Ukraine conflict pushes up energy and food prices.

Spain’s inflation rate hit 10.2 percent in June, its highest level in 37 years.

Sanchez’s government has rolled out a swathe of measures to help consumers, including a subsidy on fuel prices at the pump, direct grants to truck drivers and financial support for some farmers.

Several other European nations which have imposed temporary taxes on large firms recently to help cover the cost of measures to tackle the fallout from rocketing inflation.

Britain, for example, introduced in May an exceptional levy on soaring profits enjoyed by the likes of BP and Shell that have benefited massively from surging oil and gas prices.

Sanchez’s announcement sent the Madrid-listed shares of Spain’s biggest banks, including Santander, and its large energy firms like Repsol sharply lower.

He also unveiled several new measures, including free travel on commuter trains between September and December and an increase in monthly scholarship payments to students.

Sanchez’s Socialists were thrashed last month in a regional election in Andalusia, a long-time party stronghold.

The vote was won by Spain’s main opposition conservative Popular Party, which currently tops national opinion polls ahead of a general election expected at the end of 2023.

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FOOD AND DRINK

The foods that will increase in price in Spain in July 2024

The Spanish government's VAT freeze on certain food products is set to finish at the end of June, meaning several basic and essential items will get more expensive.

Published: 12 June 2024 09:16 CEST
The foods that will increase in price in Spain in July 2024

On June 30th the Spanish government will end its VAT rebate on certain food products, making several basic foodstuffs more expensive overnight. The measure was first approved by the government as part of a package of measures aimed at alleviating the economic consequences of the war in Ukraine and supporting low-income families amid high inflation.

In January 2023 VAT was cut on certain products that were already at the reduced rate of 4 percent, and in addition, VAT on oils (including olive oil, which was later reduced to 0 percent) and pasta were lowered from 10 percent to 5 percent.

However, after the policy was extended through the entire first half of 2024, the normal VAT rates are set to come back into force from July 1st if the government doesn’t further extend it, something that now seems unlikely.

READ ALSO: Why is olive oil cheaper overseas when Spain is the world’s top producer?

Foods that will get more expensive 

The foods that were included in the VAT reduction and will therefore now get more expensive from July include:

  • Plain bread, as well as frozen plain bread dough.
  • Flours
  • Milk: natural, certified, pasteurised, concentrated, skimmed, sterilised, UHT, evaporated and powdered
  • Cheeses
  • Eggs
  • Fruits and vegetables
  • Cereals
  • Olive oil and seed oils.
  • Pasta

This comes amid shocking consumer watchdog findings that show the price of food in Spain is, in extreme cases, up to 875 percent more expensive when sold on supermarket shelves than it is at source. This is according to a Facua-Consumers in Action press release on Tuesday.

According to the study, a kilo of lemons at source was priced at €0.20, yet the price per kilo in supermarkets is, on average, €1.79 — 695 percent more expensive. A kilo of lentils was found to cost on average 369 percent more in supermarkets than what the farmer is paid for the same product (€0.76/kg). 

Some Spanish economists argue that grocery shopping has become more expensive for Spaniards than for other Europeans because they tend to consume products that are increasing in price the most, particularly olive oil. 

The Bank of Spain has also pointed out that a preference for fresh produce in Spanish households has forced many to decide between eating healthily and cutting costs.

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