The European Commission recommends that Spain limit the use of reduced VAT and specifically points to hotels and restaurants, as, in its view, these preferential rates have a “very limited redistributive effect” on society despite their high cost to the State. In other words, they benefit higher incomes more than lower ones because they consume it the most, community sources point out. Meanwhile, the impact of this tax that is not collected is enormous: the 10% VAT for hospitality is costing Spain 0.4% of GDP, or the equivalent of almost 7 billion euros each year.
Read more Trump’s pressure forces Meliá to stop managing 15 hotels in Cuba
The review of preferential VAT rates is included in one of the suggestions Brussels makes to Spain within the evaluation of this spring’s fiscal package, in which it warns that the country has one of the largest “VAT policy gaps” in the entire European Union. The hospitality sector stands out especially, community economists indicate, because the application of reduced VAT rates represents a significant loss for public coffers and makes the Spanish tax system more complicated.
Public finances
The VAT paid on catering services is less than half that of other activities
Brussels thus reopens a thorny debate that some Catalan economists launched a few months ago, which provoked a frontal rejection from employers’ associations and unions due to the impact on activity and employment in one of the most prominent sectors for the Spanish economy. The VAT paid on catering and hospitality services is reduced, at 10%. It is less than half that of other activities – including industry – which, as a general rule, reaches 21%.
“A more restricted use of preferential VAT rates would help simplify the tax system,” states the June community document. What they understand, these Commission sources point out, is that Spain has too many exemptions and benefits in VAT, fundamentally, and they ask that this be “one of the ways to increase public revenue.”
Also read
The document also points out that, although bodies such as AIReF have carried out some evaluations, Spain does not have a “systematic approach” to analyze whether these tax benefits, such as the preferential VAT for hotels and restaurants, are really effective for their purposes. “The quality of public finances could improve thanks to better consolidated information and a systematic evaluation of all tax reliefs at all territorial levels,” the community Executive notes.
Another pending task for Spain concerns the intergenerational redistribution of wealth. The document points out that Spain presents a series of weaknesses in the social protection system, including a questionable distribution of social spending among different generations in a context of limited fiscal resources.
Read more The Valencia Court accepts Mazón’s appearance in the dana case
Public finances
The Commission recommends directing public spending to policies for the younger generations
What the Commission points out is that spending on pensions is enormous, while there is a need to direct public spending towards policies that specifically support children and young people, such as education, access to housing, and employment. Therefore, spending efficiency should increase to create the “necessary fiscal space” to address both the pressures of population aging and the needs of younger generations.
In general terms, the Commission notes that Spain complies with EU fiscal rules thanks to having activated the escape clause for defense spending, but warns of the risk that this year it may end up breaching the public spending path agreed with Brussels, by increasing it by 5.1% versus the agreed 3.5%. This would represent a deviation equivalent to 0.6% of GDP in 2026, above the maximum 0.3% annual allowed by community rules, and 0.7% of accumulated GDP during the period, also above the 0.6% cap. But Spain can breathe: by applying the escape clause, it can discount from the accumulated calculation the additional defense spending, which for this year will be 0.3% of GDP, according to Brussels’ calculations.
Also read
Brussels has added new flexibility to face the energy crisis derived from the Iran war. The community Executive confirmed this Wednesday that it will allow Member States to use the opening of this defense escape clause permitted last year, which meant that governments wishing to spend up to 1.5% of GDP to boost military spending could do so without being subject to strict European fiscal rules, to address rising energy prices.
The reasoning, according to community sources, is that it is also a matter of “European security.” But there are limits: Member States may use this margin only to allocate 0.3% of GDP (a maximum of 0.6% until 2028) for expenses related to the energy transition in order to reduce the EU’s energy dependence on fossil fuels.
Read more Leo Messi, 2026 Princess of Asturias Award for Sports
