This price increase has fed debates about alternatives to reduce the cost of a basic kitchen receipt. Ideas have ranged from cutting value added tax on essentials to creating a temporary freeze on certain basics, similar to proposals surrounding a 21 percent VAT on alcohol and a 4 percent rate on bread and dairy products.
After decades of stable food prices, a shift occurred with the VAT rise in 2012, and recent data show prices continuing to rise at a faster pace. The National Institute of Statistics tracks this trend monthly, noting a marked increase in August that signals ongoing pressure on household budgets.
Amid these conditions, several policy options have been proposed. Some suggestions call for freezing a basic basket of items, a plan tied to the Christmas period, while others advocate reducing taxes, especially VAT, on distribution and commerce. Government response to these ideas has remained firm so far.
This is the healthy shopping cart recommended by the Ministry of Consumption.
But how much of the Spaniard’s food and drink budget actually returns to state revenue? The answer depends on the foods that make up the basket and how VAT applies to them.
4% “natural” foods
Value Added Tax has a long standing rule dating back to a 1992 law, with several amendments affecting food products. The current law specifies a 4 percent rate for a set of items described as natural or basic foods. This includes common bread, baking flours, and a range of dairy products such as natural, certified, pasteurized, concentrated, skimmed, sterilized, UHT, evaporated and powdered milk. It also covers cheeses, eggs, fruits, vegetables, legumes, tubers and grains, all defined as natural products according to the Food Code that has roots going back to 1967 and whose precise definition has evolved over time.
As legislation progressed, food items were included in this minimum rate, with the recent redefinition of common bread to include breads made from flours other than wheat or whole grains, as reflected in the bread quality standards of 2019. The VAT applicable to these items shifted from 10 percent to 4 percent.
Small, medium and large businesses reject the shopping cart suggested by Yolanda Díaz
10% general group
Items usually and properly used for human or animal nutrition were taxed at 8 percent until the 2012 reform, when the rate increased to 10 percent. This group includes fish and meat and forms the backbone of the basket. As consumer prices rise, calls have grown for industries to join the ranks of staple foods, with some voices proposing a reduced 4 percent VAT on fish as part of a broader affordability strategy.
Alcohol and 21% sugar-sweetened beverages
Following the 2012 reform, a 21 percent rate was applied to alcoholic beverages, aligning with tobacco in tax treatment. Soft drinks, juices and beverages with added sugar or sweeteners have carried the same 21 percent rate since the start of the previous year. The government signaled in October 2020 an intent to raise VAT on sugary beverages from a lower rate to 21 percent as part of a broader budget plan to promote healthier consumption habits.
These tax changes reflect ongoing policy debates about how best to shape consumer behavior, support public health goals, and ensure revenue stability for state programs. Analysts note that VAT structures influence purchasing patterns, affecting both households and producers as inflation adjusts budgets and demand shifts across categories.