Spain rejects call to raise VAT to 23%

The Spanish Finance Minister has rejected a call by an influential tax committee to increase its standard VAT rate to 23% to help reduce the budget deficit.

Spain has undergone some of the steepest rises in Value Added Tax.  The Spanish VAT rate was 16% in July 2010, and was then raised to 18%.  As the Euro crisis deepened, it was forced again to raise its standard Spanish VAT rate to 21% in September 2012.

This latest call for a VAT rise comes from the Spanish Advisory Committee for Tax Reform.  It is promoting a shift from corporate and labour taxes, to encourage a drop in the unemployment rate, onto consumption taxes.

Aside from the standard VAT rate, there are many unusual exemptions or lower reduced VAT rate items that could be moved to the standard VAT rate.  The committee also proposed a rise in the current 10% reduced rate to 13%.

EU member states are free to set their own EU standard VAT rates.  The minimum is 15%, and there is no maximum rate.  They may also have two reduced VAT rates, the lower of which must be 5% or higher.