Someone has to pay for the debt-rising recession-fighting measures that the Government have introduced. Special measures such as subsidies for purchasing new cars and extra benefits for long-term unemployed workers have driven the state coffers into serious debt.
During the first parliamentary session of the new term, the President of the Government, José Luis Rodríguez Zapatero, has announced the government plans to cover the deficit with an extra 16.3 billion Euros of taxes – an average of 398 Euros per taxpayer.
The increase in IVA (the Spanish equivalent to VAT), which has been applied in Germany seems to be the favoured choice. Each percentage point increase (currently at 16%) will raise five billion Euros.
OF course, increasing indirect tax in this way has been found to be counter productive. Consumers, faced with increased costs, tend to buy less which would then slow down the economy. In fact prices of certain goods in Spain are already far higher than in other countries which is why, when I want a new camera for example, I shop online in the UK to save money. Increasing IVA will widen this gap further.