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Spain's Rajoy Considers Cultural VAT Cut

by Ulrika Lomas, Tax-News.com, Brussels

24 March 2014


Spain's Prime Minister Mariano Rajoy has said the Government will consider lowering the headline rate of value-added tax (VAT) applied to cultural goods and services within the framework of its tax reform.

Speaking in Congress, Rajoy blamed the rise in the rate of VAT levied on the cultural sector on the "disastrous" economic policies of the previous Government. The Government had no choice but to raise the rate from 8 to 21 percent in July 2012, as it inherited a public deficit of 9 percent and was facing an international bailout, Rajoy said. The Government also raised income tax (IRPF) and cut public spending, he pointed out.

Rajoy noted that not all cultural goods and services in Spain are subject to VAT at the headline rate; libraries and archive centers benefit from a reduced VAT rate of 10 percent, while books, newspapers, and magazines are taxed at 4 percent, he explained. In addition, admission to cultural services (shows, cinema and theater, etc.) that are supplied by bodies governed by public law or by other organisations recognised as charitable by Spain do not face VAT.

Spain's opposition Socialist Party (PSOE) leader, Alfredo Rubalcaba, had warned that the VAT rate must be cut, to prevent further business closures and job losses. The VAT hike has emptied the nation's cinemas, theaters, and concert halls, and four in ten workers have lost their jobs, he stated. The fact that Spain applies the highest VAT rate in Europe is a cultural, human, and an economic disaster, he said.

TAGS: tax | business | value added tax (VAT) | tax rates | Spain | tax breaks | tax reform | individual income tax | European Union (EU) | services | Europe

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