SPAIN is suffering its worst recession in recent memory and the good old Spanish government has decided to increase VAT by two percent (from June) and ban smoking from bars and restaurants (from tomorrow).
This must be great news if you own a bar or a restaurant because both moves are going to result in a loss in trade. Now the smoking ban doesn´t really make sense. All restaurant owners have spent large amounts of money building or fitting their businesses with a smoking area to comply with the first law which was introduced three years ago.
Now, all this has been for nothing because their business is now all non-smoking. Now, the increase in the VAT rate is obviously needed because the Spanish government is short of cash because of the high rate of unemployment (four million). But it is interesting to note that most other European countries have reduced the VAT rate in an effort to try and stimulate consumer confidence. In Spain it is the exact opposite. If the Spanish government wants Spain to pull out of recession sooner rather than later than both the smoking ban and the VAT rate increase should be put on hold until times improve. Any green shoots of recovery could be destroyed by short sighted government policy.