In a speech to Parliament on July 10, Spain's Prime Minister Mariano Rajoy announced a number of new taxes and spending cuts in an effort to cut 65 billion euros from the budget deficit by 2014.
The announcement included plans to raise the standard VAT rate from 18% to 21%. (Spain had been planning a rise from 18% to 20% in 2013.) The reduced VAT rate will also rise from 8% to 10%, but there will be no change to the super reduced VAT rate of 4%.
Recession-plagued Spain continues to struggle to meet tough targets agreed with Europe, and the July announcement also included cuts in unemployment benefits and civil service pay.
The new VAT rates will go into effect on September 1, 2012.
In Italy, by contrast, the planned increase in Italian VAT from 21% to 23% scheduled for this September has been delayed until July 2013.
High Street Partners