Post 6: VAT rates to be increased in July

Spain is planning to increase the IVA/VAT rate by July of this year. The increase is as follows: The 4% rate which includes "basic needs" will be kept at 4%, the 7% rate which includes a wider variety of goods and services such as contact lenses, funeral services and restaurants, will be raised to 8%, and the "general rate" which is now 16% and includes all other products such as tobacco, and alcoholic drinks, will be raised to 18%. This plan to raise the VAT rates has upset the Partido Popular (Peoples Party). The party is demanding that congress debate the effects that this increase will have on the economy before it goes into effect in July. The European Commission has said that this increase could be a threat to Spain exiting the recession. Soraya Sáenz de Santamaría, who is the spokesman in congress for the Partido Popular, has recently met with her socialist counterpart from the government José Antonio Alonso to discuss the issue at hand. Alonzo's argument was that the faith that the markets have in Spain would be damaged by the Partido Popular's plan for debate. The minister for tax and the economy Elena Salgado, agrees with Alonzo that consumer spending could be damaged however, she does not feel that GDP would be affected. The Partido Popular is sticking by their demand for debate in congress and requests that the increase be suspended until such debate takes place.