Palma.—Over the past few weeks, parents, for example, have interrupted their normal summer holiday routine to stock up on all the new items their children need for when they go back to school ahead of Saturday's increase in VAT from 18 to 21 percent.

But, it is not only parents who are going to feel the pinch, everyone will at all levels- from households to businesses and, apart from the government, there are few people in Spain who approve of the VAT hike.

The Spanish government has its hands tied, putting up VAT was one of the conditions attached to European Bank handouts to try and prevent Spain from needing a sovereign bailout - although that prospect is becoming a reality as the days pass and little improves.

Even leading economists have questioned this latest attempt to balance the books but, like it or not, Saturday is D-Day for the increase in VAT and the government is not ruling out putting up income tax again.

Black Friday
For example, the cost of gyms, golf classes, cinema and theatre tickets, entrance into night clubs and going to the hairdresser is going to cost 13 percent more with VAT on these services rising from eight percent to 21 percent.

And that is going to hit consumers, who are already suffering from the recession, cuts in wages, reductions in paid holidays and runaway unemployment. Many parts of the retail sector fear that consumer confidence is going to hit an all time low and, as a result, high street spending will fall further and that will lead to the eventual closure of shops, especially in the small to medium sector, with the subsequent loss of even more jobs.

At the top end, VAT is already at 18 percent so a three percent increase may not be so marked.
But it will, for example, hit the vehicle sector which has struggled to keep its head above water through the recession.
The only good news is that VAT on food prices and medicine will remain frozen at four percent.
But, there is no other good news as Spain prepares for black Saturday.
What is going up l Gas/electricity 18> 21% Bills from September 1 will include the three percent increase although consumption will be back dated so expect bills to be higher. l Culture 8> 21% This has been one of the most criticised by consumers and the industry. If you are going to the cinema or theatre this weekend, it will be more expensive. l Food 4> 4% The only good news is that basic food items will not go up in price. l Hairdressers 8> 21% Another very unpopular move - 13 percent more to have a hair cut. l School items 4> 21% School books may not be going up in price but everything pupils need is hence why large families have already stocked up. l Glass lenses 8> 10% Special lenses and contact lenses will only rise by two percent but sunglasses and fashion glasses will go up to 21 percent. l Funerals 8> 21% Hard blow on behalf of the state. l Flowers/plants 8> 21% An expensive gift from now, never mind the extra cost for gardeners. l Art 8> 21% Collectors are going to have to bid higher. l Hotels/bars 8> 10% Just a two percent rise to try and maintain competitiveness. Industry says it is too much. l Discos 8> 21% Having fun has just got more expensive. l Sport 8> 21% On the one hand we are all being urged to keep fit but its now going to be twice as costly, physically and financially! l Cable TV 8> 21% The Balearics will be hit significantly because it is one of the regions of Spain which receives the most TV via cable. l Construction 8> 10% Albeit two percent, the struggling construction industry fears that this further increase will lead to less contracts at a time when hoteliers, for example, will normally be planning their winter reformations. And less new builds are expected, according to experts.

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