Spain to Extend Tax Cuts on Basic Foods Ahead of July Snap Vote

Alonso Soto
·1 min read

(Bloomberg) -- With elections looming next month, the Spanish government of Prime Minister Pedro Sanchez plans to extend tax breaks on staple foods until living costs ease further.

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“We will maintain a lower value-added tax on basic food items for as long as we don’t reach adequate price levels,” Economy Minister Nadia Calvino told reporters Monday at the headquarters of Sanchez’s Socialist party in Madrid.

The government unveiled a multi-billion-euro package in December to ease the burden of surging prices by cutting VAT on some foods as well as electricity bills, and subsidizing some public transport. The decision to extend the tax reduction on foods comes as Sanchez faces a tough fight to stay in power against a resurgent People’s Party, which opinion polls show could be on track to win the July 23 vote.

Calvino said the government is still weighing whether to keep other elements of the December package in place.

While headline inflation in Spain has eased below 3% so far this year, food costs are still increasing at a double-digit rate.

The erosion of real income after two years of high inflation hurt the Socialists in local elections held May 28, in which the conservative PP won control of key regions and cities.

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