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Spain eliminates VAT on basic foods to contribute to rising cost of living

origin 1Spanish Prime Minister Pedro Sanchez spoke at a press conference to take stock of the economic and political situation over the past year in Madrid, Spain. © AP Photo/Paul White

Spain will eliminate value added tax on basic food items for six months as part of a series of new measures to help people cope with the rising cost of living.

Prime Minister Pedro Sánchez has announced that the VAT will be reduced from 4% to 0% on basic food products, such as bread, cheese and vegetables, while it will be reduced from 10% to 5% on oil and pasta.

The government has also approved a one-off aid of €200 for families with incomes of €27,000 or less to offset rising food prices.

The new anti-crisis aid package is worth 10 billion euros, bringing government spending on relief measures to 45 billion euros.

Since Russia launched its invasion of Ukraine in February, the Spanish government has announced numerous aid packages to help the poorest families cope with inflation, which has soared across Europe.

But while inflation has eased in Spain, food prices have remained high.

The Spanish government had to decide this week whether to extend the aid measures for next year.

Sánchez said he will extend the reduced VAT on electricity and gas prices for six months. He also said the ban on cutting energy supplies to vulnerable households would remain in place through 2023.

The 50% discount on urban public transport will be extended for the first half of 2023, he added.

Sánchez also announced that he will extend the 2% limit on rent increases for a year and that evictions will remain suspended for the next six months.