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Restaurant tax cut could create 15,000 jobs

A decrease in restaurant taxes could create 15,000 new jobs, particularly for young people and immigrants, according to a new report.

The survey assumes a lowering of the value-added tax (VAT) on restaurant services from 25 percent to 12 percent, the Swedish Retail Institute (Handelns Utredningsinstitut, HUI) reported.

The report was developed on behalf of the Swedish Hotel and Restaurant Association (SHR) and its findings are supported by a number of the country’s leading economists.

“The report clearly shows that lowering the restaurant VAT is a simple and effective tool to create 15,000 new jobs,” said SHR CEO Eva Östling Ollén in a statement. “It is remarkable that the political parties are reluctant to implement this effective measure against youth unemployment and marginalisation.”

HUI’s report shows that a reduction in the restaurant VAT to 12 percent from the current 25 percent would result in the creation of between 7,000 to 34,000 new jobs in Sweden.

From this assessment, SHR estimates that at least 15,000 new jobs would be a more realistic level. It would represent a reduction of the current youth unemployment rate by almost 10 percent.

Combined with continuing reductions in employer contributions, the Swedish tourism industry could generate substantially more jobs, especially for young people.

“The restaurant industry employs mostly young people,” said Östling Ollén. “More than a third are under 25.”

SHR’s assessment of the impact of a reduced restaurant VAT is also supported by some of the country’s leading economists. HUI’s report was sent to them for their opinions on the impact of tax breaks in the service sector.

A clear majority believe that a measure to lower restaurant taxes is an effective way to boost employment, particularly for groups with a weak labour market position.

Sweden currently has the world’s highest restaurant taxes. After the EU Commission gave member states the opportunity to lower the restaurant VAT last year, France and Belgium reduced their taxes, with Finland following suit on July 1st.

Östling Ollén recalled that the government promised to investigate the possibility of reducing the VAT on restaurant services, among other things, in January 2011 in order to create new jobs, but she would like to see an earlier date.

“I can understand the government waiting on lowering the restaurant sales tax given the recession,” said Östling Ollén. “However, now it is the time to implement this. It is important that it is done quickly, when a possible red-green government is not as consistent on the issue.”

According to a poll conducted Novus on behalf of SHR, six out of 10 Swedes think that it is wrong that the VAT rate on food is different. More than half said they would dine out more frequently if the restaurant VAT rate was lowered to supermarket levels.

“The VAT on food served in restaurants is currently more than twice that of food from a grocery store,” said Ollén. “A decline to 12 percent would also represent that we are getting rid of an unfortunate and unfair system.”

Such a reduction in restaurant prices is equal to the VAT decline of 13 percentage points that SHR recommends, which would cost the same as two lunches per month for those who eat out every day.

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TAX

The taxes in your region of Spain you probably didn’t know existed 

Madrid has just announced it wants to be the first region to scrap regional taxes, but what are these tariffs that apply to specific autonomous communities? And where in Spain do taxpayers pay the most?  

The taxes in your region of Spain you probably didn't know existed 
Which autonomous community in Spain has the most regional taxes? Photo: Javier Carro/Wikipedia

Spain’s 17 autonomous communities, with the exception of the Basque Country and Navarre, all have their own taxes which are applicable to people and companies in their territory. 

Known as impuestos propios (own taxes), these tariffs are applied by regional governments to address matters pertaining to their community which they’re looking to solve. 

On September 1st, Madrid’s regional president Isabel Díaz Ayuso made headlines by announcing she intended to scrap the remaining impuestos propios in the region (tax on slot and arcade machines in bars and restaurants and a tax on the storage of waste), amounting to €3.4 million annually for Madrid taxpayers.

This only accounts for 0.02 percent of taxes paid by the region’s 6.6 million inhabitants, but Ayuso’s announcement had made people across Spain more aware of the existence of these little-known regional taxes in their part of Spain.

Madrid’s leader has argued that some regional taxes are now becoming redundant or obsolete as other tariffs are introduced by Spain’s central government on a national level.

madrid scraps regional taxes impuestos propios

Ayuso has said her government will refuse to adapt its tax system to decisions made by Spain’s central government, especially when it comes to its very low taxes on inheritance and assets. Photo: Javier Soriano/AFP

Spain’s 17 regions are responsible for applying their own autonomous taxes, which depending on what they are, can make life more or less expensive for the average person in Spain depending on their location. 

Regional governments are also responsible for setting tax levels on inheritance and assets, which can vary enormously between territories.

EXPLAINED: How choosing the right region in Spain can save you thousands in inheritance tax

So which region of Spain has the most regional taxes? And what are the impuestos propios that you have to pay in your part of the country?

Catalonia

Catalonia has the most regional taxes of all of Spain’s 17 regions, with 13 impuestos propios adding €137.3 million to public coffers in 2020. 

The latest to be added is the tax on C02 emissions for vehicles, along with other tariffs on large commercial establishments, empty homes, tax on tourism stays, sugary drinks, a tax on luxury goods and several other environmental levies relating to water, waste and emissions. 

Andalucia

Spain’s largest region has the second highest number of regional taxes in the country with eight impuestos, although some of these are currently not applied. 

Taxes on unused land, credit agency customers, single-use plastic bags and a number of other environmental taxes added €145 million in tax revenue to Andalusian authorities in 2020. 

Murcia 

Murcia has six regional taxes in place in 2021: three environmental ones, one on bingo prizes, another on economic activities and a water treatment tax, all of which accounted for €55.9 million in taxes in 2020.

Galicia 

The northwestern region has six autonomous taxes which added €80 million to public coffers last year, including a fee on derelict or abandoned homes and a number of environmental taxes relating to mining, pollution, wind energy and water treatment.

Asturias 

Galicia’s northern neighbour also has six regional tariffs which added €118 million paid to Asturias’s tax office in 2020. They include a tax on bingo prizes, water treatment, unused rural land, large shopping centres, economic activities as well as environmental levies. 

Economists in Asturias are calling for regional authorities to lower levies for inheritance and asset taxes as well as regional taxes, suggesting higher-than-average tariffs are dissuading investors.

Canary Islands 

The Atlantic archipelago has five individual taxes, three of which belong to the Canaries’ unique IGIC tax regime (no VAT): General Indirect Tax, AIEM consumer tax and registration tax. The other regional levies are on tobacco, waste spills and petrol-based products.

Aragón 

Aragón in northeast Spain has five regional taxes, all of them environmental. In 2020 Aragonese authorities collected around €100 million from taxes on water pollution, atmospheric damage, environmental impact of large shopping malls, electricity installation and transport as well as on the use of stored reservoir water.

Extremadura

The western region also has five regional taxes which added €115 million to public coffers last year. Active tariffs in Extremadura are on landfill processes, water treatment and hunting.

Valencia region 

The eastern region has four regional taxes in total: a tax on empty homes for those with more than ten properties, tax on waste processes, activities that have an impact on the environment and water treatment. 

The Valencia region’s tax head Vicent Soler has referred to Ayuso’s words as a “smokescreen” that accounts for an insignificant amount for Madrid taxpayers and that slashing regional taxes “will mean those who need it most get fewer services”. 

The Balearic Islands 

The Balearic Islands also have four regional taxes, of which only two are currently applied: the tax on tourist stays (€36.8 million collected in 2020), which is based on overnight holiday stays on the islands, and the wastewater treatment fee (€78 million collected in 2020).

La Rioja

Spain’s famed wine-producing region has four regional taxes, with which in 2020 it added €12 million to its public coffers. These are a tax on cell towers that have a negative visual impact,  water treatment, waste management and a levy on economic activities.

Cantabria

Cantabrian authorities collected €27 million in 2020 from their regional taxes on water treatment, waste deposit in landfills and a levy on economic activities. 

Castilla-La Mancha

In the central Spanish region there are regional taxes on wind energy and economic activities that have an environmental impact.

Castilla y León

Authorities in Castilla y León have said they don’t plan to follow in Madrid’s footsteps and eliminate its own current environmental taxes, which are mainly paid by electricity companies.

Castilla y León currently receives almost €63 million with its tax on the environmental impact caused by certain uses of stored reservoir water, a tax on wind farms and another on high voltage electric power transmission facilities, as well as a further €7.6 million from landfill waste management taxes.

You can read more about impuestos propios on Spain’s Hacienda website (information in Spanish). 

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