VATLive > Blog > VAT > Spanish retail shrinks as VAT rise fades and deflation takes a grip - Avalara

Spanish retail shrinks as VAT rise fades and deflation takes a grip

  • VAT
  • 30 March 2014 | Richard Asquith

Spanish retail shrinks as VAT rise fades and deflation takes a grip

The latest Spanish annual retails sales figures showed a reversal of a temporary recent uplift.  This drop off was partially down to residual impact of the September 2012 Spanish VAT raise from 18% to 21%.

Following three successive years of decline since 2010, Spanish consumer spend in the shops had been picking up.  However, these latest figures show a return to the steady decline linked to stubborn, high unemployment and austerity measures of the government.

The brief respite since September 2013 was actually a bounce from the September 2012 VAT rise dropping out of the annual calculations.

There was also a drop in the retail price index measure of inflation for February of 0.3%, giving rise to worries that the problem will worsen with shoppers postponing non-essential expenditure as they expect further price discounts.  The same problem dogged Japan for almost twenty years.

The 2012 Spanish VAT rise was the second austerity indirect tax hike - Spain increased its VAT rate from 16% to 18% in 2010.  Spain started the 2007 financial crisis with one of the lowest VAT rates in Europe at 16%.  However, it is now close to the average EU VAT rate of 21.6%.


VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He is part of the European leadership team which this year won International Tax Review's Tax Technology Firm of the Year. Richard qualified as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.