The 0% VAT basket provides the opportunity to directly support families

“Our option is to make compensation equivalent to zero VAT permanent across all social benefits, covering the most vulnerable sections of society,” said a government official, clarifying that thus, instead of a general mechanism from which everyone benefits, it will target the most vulnerable families.

According to Fernando Medina, this measure will benefit about one and a half million people, namely about 1.1 million who receive family benefits, about 150 thousand who receive the solidarity benefit for the elderly, and about 150 thousand who receive social benefits to increase their income.

Zero VAT began in April and was due to end in October. However, it was extended until the end of the year, which contributed to a decrease in prices for the food basket.

Asked if he feared that the lifting of the measure could cause inflationary pressure on prices, Fernando Medina said he believed “all agents involved will be interested” in “an appropriate transition from this regime to the new regime.”

“We are seeing an evolution in prices that is different from what we have seen in the past,” he said, noting that it is important “that the measures reach those who really need them in a timely manner.”

Budget surplus
The government expects to achieve the best budget balance in democratic history this year, pointing to a surplus of 0.8% of GDP (€2.1 billion) and 0.2% in 2024, according to projections in the OE 2024 proposal.