Palma.There was some good news yesterday for the consumer as major retailers in Spain said they will try and absorb the VAT increase.
Supermarket giant Mercadona, which claims 90% of its more than 8'000 lines have kept the same prices from a year ago, is the latest to announce it will not pass on the IVA increase to customers, joining other big names including, Inditex, Eroski, Carrefour, Lidl, Mango, H&M, El Cortes Inglés and Cortefiel.
The IVA rate is set to jump this weekend from 18 percent to 21 percent with the reduced rate rising from 8 percent to 10 percent, while the super-reduced rate, which applies to fresh food staples, books or prescription drugs, will remain at 4 percent.
But while the big retailers claim they can absorb the increases, small traders and the self-employed fear the worst.
Yesterday, the Majorcan Federation of Small and Medium Sized Business, Pimem, warned that Saturday's increase in VAT will only serve to speed up the mass closure of small businesses and force many of the self-employed to cease business. IN an official statement, Pimem reminded the ruling centre right Partido Popular government that, when it was in opposition, it continuously criticised the governing Socialists for putting up VAT.
So for this reason we feel cheated and deceived by the PP, Pimem stated.
The Federation added that it is increasingly concerned about the government's measures to try and pull the country out of recession because all they seem to be doing is making it worse by pushing more business to the wall and more people out of work.
How can the government justify putting the cost of going to the hairdresser or buying flowers up by 13 percent, Pimem asked.
All this is going to do is lead to a further contraction of the economy and, as always, the primary victims are going to be families, small business and the self-employed.
But, it is not only going to be the Spanish population who pays the price for Spain trying to desperately avoid a sovereign bail out.
Holiday makers coming to Spain after Saturday will be losing out financially.
Those who failed to book before the end of this month will be shelling out more money for car hire and accommodation.
Official figures show that 19 million foreign holiday makers visited Spain between January and the end of May but tourists could be put off by the VAT hike, the Spanish Tourism Commission has warned the government.
They added that the tourist sector regrets the Government's lack of sensitivity for a strategic sector that is key to kick-starting and accelerating Spain's economic recovery, indicating that instead of boosting the economy the hike would actually prove more of a setback.
The tourist industry had been hoping for either a VAT break or a VAT freeze to help them compete against other destinations and have funds to invest in reformations and improvements, but the government ignored their plea.
Fight back: page 6
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