Spain: VAT tax rises to reduce the deficit

The increased value added tax (VAT) took effect on Thursday in Spain, as part of government efforts to limit the public deficit, while the Spanish economy for weeks is under scrutiny of the institutions and markets financial, to doubt its soundness.

VAT increased by two points, from 16% to 18%, prices of many products such as appliances, leisure products and alcoholic beverages.

From 7% to 8% in food, soft drinks, hotels and catering.

Products called "first necessity" (rice, eggs, bread, fruits and vegetables) are not affected by the increase.

This increase in the VAT comes into force to coincide with the first day of summer settlements, through which traders expect to delay the first negative effects on sales.

The VAT hike was announced in September by the Socialist government of José Luis Rodríguez Zapatero and approved by parliament in December.

The measure, along with others taken by the government, will help solve the "grave and tremendous" deficit problem that has now Spain and credibility with the markets, said Thursday on the radio RNE Secretary of State for Finance, Charles Ocaña.

The government approved in May a harsh austerity plan 15,000 million for 2010-2011 and with it hopes to reduce the public deficit, which reached 11.2% of GDP in 2009 to 3% in 2013.

The VAT increase will have a "limited" in the pockets of the Spanish, according to Ocaña.

According to Spanish media, representing an average annual increase of 300 to 350 euros in the family expenditure.

Car construction companies fear a negative impact and anticipated an average reduction of 30% of sales in the second half, due to a combined effect between this increase and the end of subsidies from the government, which helped to increase sales in the first half .