The reduction of VAT on staple foods to 0% in the first half of the recently launched year re-started the historic battle of Canarian importers against AIEM (Consumption Duty on Import and Delivery of Goods). They assure that the measure adopted by the Government of Pedro Sánchez further increases the cost of the Canarian shopping cart compared to that of the country as a whole. For example, if a yogurt is 11% more expensive than on the Peninsula, this difference is now 15%.
The four-point distance is determined by indirect taxation (VAT), which governs the entire continental European region, which the central government decided last week. Consumers in the Peninsula were taxed at a rate of 4% until 31 December when they bought the above-mentioned milk derivative. On the islands, it has been exempt from IGIC for years, while AIEM taxes it at 15%. The Canary Islands Importers Association (Adican) emphasizes that the difference of eleven points—fifteen minus four—since the first day of 2023 is fifteen—fifteen minus zero.
Exactly the same is true for many other products, such as eggs or onions, but when it comes to pasta, for example, the gap gets wider, going from five points to thirteen before.
AIEM is a financial figure that declares in its spirit an assurance of local Canarian production. A tool that makes products brought from abroad more expensive to make products produced by the island industry more attractive. This sector closed the month of November with 39,326 jobs distributed to 2,867 companies affiliated to SGK. It is responsible for 7% to 8% of the gross domestic product (GDP) of the autonomous community.
Adican’s president, Pedro Peña, disagrees. “After 20 years, we saw that products with a market share of more than 90 percent, which are not produced here, even the domestic version, entered the AIEM list. The goal is not to protect anyone, but to collect”, he states.
In his view, it is unthinkable that “a tariff” in a “single market” like Europe would translate into a greater effort by families to fill their shopping cart. He adds to this the “negligence” taken in the Canary Islands after the “increase in freight cost” with the activation of global distribution networks after the pandemic.
Importing businessmen emphasize that the inflationary trend was already fully established before Putin gave the order to invade Ukraine. Russia’s warmongering escalation only worsened the situation (energy and raw materials such as grains) and accelerated the overall rise in prices. Of course, they exclude any changes to the AIEM, as this will result in lower collections for the Canary Islands coffers.
They also assume that because they need Brussels approval, it is impossible in the case of AIEM to create rapid changes in the IGIC, such as those driven by VAT now and more than a decade ago. The current margin of appreciation applies to the period 2021-2027, although there are interim times when the Government of the Canary Islands must report to the European Commission (EC) to record the results.
“We don’t think there will be any downside fluctuations in 2024 that will lessen this impact, we’ve been there for many years and it’s never been like this; If any product has survived AIEM, it’s because it’s no longer produced in the Islands and still needs to be pressured”, complains Peña.
Grisaleña: “We are second class”
Historical importer businessman Sebastián Grisaleña, founder of the family business Grisaleña SL and former president of the Confederation of Businessmen of the Canary Islands (CCE), does not bite his tongue. It ensures that being the only region in the EU to have a tariff such as the Import and Delivery of Goods Tax (AIEM) makes canaries “second-class Europeans”. Add to this the increase in fiscal pressure “without any respect” on the Canaries, and the “reaction” by successive governments when it comes to AIEM. It is precisely this lack of transparency that has been one of the biggest criticisms of arbitration throughout its history. Even the voices of independent economists have suggested more publicity as a formula to moderate the debate. | JGH