Spanish supermarkets investigated over sales tax reduction on basic foods

Spain's major supermarket chains are under scrutiny as the Ministry of Consumer Affairs has opened an investigation into whether they are accurately applying the government's IVA sales tax reduction on essential foods like olive oil, fruits, and vegetables.

The national government introduced this reduction at the beginning of 2023 as part of a broader strategy to combat the challenges posed by rising inflation. The primary objective of the inquiry is to ensure that retailers have not taken advantage of the measure to increase profit margins and that consumers are not being overcharged for essential food items.

The Ministry of Consumer Affairs has formally requested information from the country's leading food distributors in response to complaints from consumer associations, who have raised concerns about whether or not supermarkets are passing the reduction on.

As the first phase of the investigation unfolds, the ministry has asked major supermarket and hypermarket chains operating in Spain to provide detailed information on the prices at which products have been sold in recent months, taking into account the IVA cut.

Additionally, the ministry is seeking information on the profit margins and cost structures of food distribution chains, aiming to determine whether consumers have fully benefited from the sales tax reduction.

They also confirmed that any supermarket chains found in violation of profiteering rules could face fines of up to 100,000 euros for each transgression.

Reaction from consumer associations

In response to the investigation, the consumer association Facua, which had previously warned the government of "suspicious price increases," welcomed the inquiry. Facua highlighted a recent study where 10 out of 13 types of food in a sample experienced higher price increases in supermarkets compared to the reductions applied due to the IVA cut between January 2023 and January 2024.

However, the National Association of Large Distribution Companies (ANGED) maintains that supermarkets and hypermarkets are correctly applying the IVA reduction to prices. It emphasised that the matter has been extensively analysed and publicly reported by the Bank of Spain, the National Commission for Markets and Competition (CNMC), and the Ministry of Economy, all of which have affirmed the correct application of the reduction.