Spanish government increases taxes on tobacco and alcohol… but wine and beer are safe

Spanish wine and beer will escape the latest round of tax increases

Amid the numerous labour reforms and austerity measures currently being applied as a salve to Spain’s weeping economy, Spaniards had at least been able to revel in the minor comforts afforded by the availability of cheap tobacco and alcohol.

However, the Spanish government – keen to make savings and recoup tax revenue wherever possible – has announced that it is to raise taxes on all forms of tobacco and alcohol, with only wine and beer escaping the increases…

The move is expected to generate some 700 million euros in 2013 alone, with Budget Minister Cristóbal Montoro announcing that for alcoholic drinks “the tax increase will be of 10 per cent, but wine and beer will not be touched.” Ministers were coy on how much extra tax would be added to tobacco, but in all likelihood the figure will be around 10 per cent.

Amid a backdrop of mounting pressure from the EU, Spain’s Prime Minister, Mariano Rajoy, increased sales tax from 18 per cent to 21 per cent in 2012, yet essential everyday items such as milk and bread were actually made cheaper.

Additional measures to tax the gases used in air-conditioning units and refrigeration mean that the extra revenue could reach 1bn euros by the end of 2013, according to Montoro.

With the economic downturn badly affecting the Spanish government’s spending power, many quarters of the country welcome these cuts. However, with unemployment still at around 27 per cent, those on the dole queue see yet more measures of austerity as a further erosion of their already meagre standard of living.

The news that beer and wine will escape the tax hike will be of little comfort to many, but for millions of others – particularly prospective British expats or home owners looking for their dream place in Spain – it’s a positive, of sorts.

And either way, even with the tax hike typical bar and supermarket prices for your favourite tipple will still be far more favourable in Spain than in the UK. And then there’s always that great British tax haven Gibraltar, which is stuffed to the brim with inexpensive tobacco and alcohol…