VAT revenues climb almost 12 percent in September due to rate hikes, minister says

Value-added tax collections climbed 11.9 percent month-on-month in September as a result of the government’s rate hike, Finance Minister Cristóbal Montoro said in parliament on Tuesday.

The government raised the standard VAT rate to 21 percent from 18 percent at the start of last month and the reduced rate to 10 percent from eight percent. It also shifted some items from the reduced to the standard rate.

Montoro said the hike helped reduce the fall in revenues from this tax in the period January-September from 10 percent to five percent. Small companies also pay their quarterly taxes in September.

The increase in VAT revenues was achieved despite retail sales plunging 10.9 percent last month from a year earlier as consumers brought forward the purchase of big-ticket to avoid the VAT hike.

“The state’s revenues are clearly improving,” Montoro said, adding that personal income tax collections through to September were up 2.9 percent, while corporate tax revenues were up 4.1 percent are previously “falling dramatically.”

In homogenous terms – without including advance transfers to cash-strapped regions – the central government’s deficit in the first nine months of the year was 3.9 percent of GDP. Montoro said this made it possible for the administration to meet the target for the year agreed with the European Commission of 4.5 percent of GDP, including an estimated shortfall in the Social Security System of one percent of GDP. The deficit in the period January-August was 4.7 percent of GDP.