Friday, June 07, 2013

The Super-Reduced Rajoy: Señor 4%

Mariano may be denying everything as usual but, as with his likely bowing to the Sheldon Adelson billions and so the creation of the great smoking exception at Eurovegas, chances are that he will be forced to prostrate himself in front of the Rompuy-Merkel altar and will indeed need to "touch" IVA once more.

We're not touching anything, only exploring recommendations (these recommendations being a euphemism for demands). This was what Mariano had to say on Tuesday. There are no plans to amend the structure of value added tax, he remarked on Wednesday. By Thursday, however, and even if Rajoy was continuing to deny, the ministerial supremo for industry, energy and tourism, José Manuel Soria, was suggesting that there could well be some touching up in an IVA style. Recommendations? No, you'll do as we say.

It is not known whether Sheldon has been having a word other than the one regarding permission to smoke at Eurovegas in Mariano's shell-like, but if he has, it may well be along the lines of: "Y'all know this 21% Eva for casinos. I've heard tell y'all have lower rates of Eva. I'm not talking 10%. I'm talking 4%, boy. Super reeeeduced, baby."

The super-reducing Rajoy, growing smaller by the day, will probably have some bad news for anyone inclined to ask for special dispensation and slap a mere 4% IVA on a business operation. The troika, as part of its demands (sorry, recommendations) has been eyeing up the super-reduced rate of 4%. We know this because, although Mariano has been mute on the subject, JoSo at industry, energy and tourism has been singing like a canary; appropriately enough for a former president of the Canary Islands. The demands-recommendations have fingered the 4%, JoSo has admitted, and they are going to be touched up and will head upwards. To 10%. Or more. Possibly.

And to what types of service or product does the super-reduced rate currently apply? Basic food products are one, pharmaceutical products another. And then there is the written word. Books are 4%, so also are newspapers.

Soria has said that other countries apply higher rates for products which are super-reduced in Spain, and he's right, some countries do. But then some others, and the UK is one, apply a zero rate to newspapers. Osborne hasn't been so mad as to incur the eternal wrath of the "Mail" or "The Telegraph" by slapping VAT on them. Actually, it is not a case of not being mad. In a democracy where there is a premium on the value of information, no premium is attached to its price. Spain has attempted to keep this premium as low as possible, but it may just have lost the struggle.

The Newspaper Society in the UK is one organisation that has been to the fore in guaranteeing that the zero rate of VAT is maintained. It has also campaigned for zero rates in Europe. Were there to ever be harmonisation of VAT throughout the European Union, the zero rate on newspapers would, the Society hopes, be adopted.

The need for deficit reduction, however, cares little for the democratic principle of making information as cheap as possible. One can argue that, especially under difficult economic conditions, the exemptions of zero rating or super-reduction should be scrapped. If certain products and services have had to suffer rises, then why not others? (And it should be noted that, of the three rates of Spanish IVA, the super-reduced rate has been the only one that has not been raised.)

Yes, one can argue this, but there is a further principle of facilitating reading. It should also be noted that Spanish parents were hit with a significant rise in IVA for most school materials last September. Books might now become more expensive and so there is, therefore, an educational principle to be taken account of as well.

And while the cost of a newspaper or a book might rise because of an increase in IVA, the cost of production would also, in all likelihood, rise. Printing a newspaper attracts 4% IVA, while most other printing is charged at 21%. Inputs and outputs there are in value added tax, but they don't mean that prices don't rise or margins aren't eroded.

There is a perversity in European demands to increase the super-reduced rate. On the one hand, there is the Newspaper Society lobbying and gaining a general consensus about future zero rating and the European Union standing for freedom of information and the democratic principle of information. On the other hand, this same union might make Spain increase the price of democracy. This recommendation, at least, should be resisted. 

Any comments to please.

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