TRUE OR FALSE. Has the 0% VAT on basic necessities “brought down all prices” in Spain and Poland, as Sébastien Chenu claims?

“I noticed that in Spain or Poland (...), they did it with zero VAT rates and it worked, but better, it brought down all prices and not just basic necessities,” said Sébastien Chenu, the president of the RN group at the National Assembly, speaking to franceinfo, Monday, November 9. The far-right MP defended the proposal put forward by the RN to lower VAT on basic necessities from 5.5% to 0%.

A measure to “give additional purchasing power” to the French. Lowering VAT on basic necessities is a proposal that often comes up in the debate. Already in 2019, Edouard Philippe, then Prime Minister, judged the measure “intellectually possible” on France Inter.

However, looking at these European countries, the absence of taxation on basic food products has not led to a significant increase in purchasing power. In January 2023, the Spanish government of Pedro Sanchez removed the 4% VAT on basic food products such as bread, milk, cheese, eggs, fruits and vegetables and cereals. Initially planned for six months as a response to inflation, the measure was extended until the end of September 2024.

The tax on oil and pasta went from 10% to 5%. “Minimal price drops” in SpainHas the VAT cut led to a drop in prices? Figures from INE, the Spanish National Statistics Institute, show a limited impact.

During the first months of the tax removal, food prices continued to rise. In February 2023, consumer prices increased by 16.6% compared to the previous year and by "more than one percentage point compared to the previous month", we can read in this press note from the INE. For economist Jesus Castillo, specializing in the euro zone and Southern Europe, the VAT cut had a "not very significant" effect.

“There was a big acceleration in food prices in 2023, and so many other factors worked in the opposite direction [from the reduction in VAT] that it completely erased the movement.” Among the factors: the “war in Ukraine”, the “rise in the price of cereals” or the “rise in the price of energy”. The Spanish consumer protection association Facua monitored food prices during the period when the zero-rate tax was in force.

The association considers this measure “ineffective and insufficient for consumers”. It "resulted in only minimal price reductions for products which, in many cases, had undergone considerable increases", she concludes. A measure which benefits more the wealthiest A study by the Spanish Center for Economic Policy, EsadeEcPol, draws the same observation: “The overall impact of this measure is modest compared to the scale of the inflationary shock.

"The research institute also points out the fact that it is the wealthiest households, because they consume more, who benefit the most from this abolition of VAT. This measure does not "constitute an effective tool for increasing the progressiveness of our socio-fiscal system", adds the Council for Obligatory Levies (CPO), a French body associated with the Court of Auditors, in a 2023 report. The reduction of a VAT rate "does not make it possible to target low-income households and benefits, in euros, more to well-off households.

The Spanish study center estimates that "a targeted policy of income transfer to low-income households would have been more effective (...) and less costly from a budgetary point of view". An inefficiency "aggravated", according to the Facua association, by the "lack of control exercised over large distribution chains" to prevent them "from increasing their profit margins".

In Poland, the key role of a price monitoring authorityPoland is another eurozone country to have implemented the reduction of the tax from 5% to 0% on essential food products. Entering into force in February 2022, as part of an anti-inflation shield, the measure was extended until March 2024. A study published in 2025 by two Polish economists, Krystian Jaworski and Jakub Olipra, shows that the abolition of VAT had rapid effects: “We observed an almost complete impact of this reduction on consumer prices.

" The researchers estimate that "the effect of the reduction in the VAT rate reached its peak in less than five months, (...) which led to a reduction in overall inflation of around 0.7 percentage points". This reduction remains "however limited compared to the level of overall inflation in Poland" at this period, they qualify.

The study also highlights the key role of UOKiK, the Polish competition and price monitoring authority, without which a “repercussion” of the absence of taxation on lower prices “would not have been possible”. The organization has “launched a vast price monitoring campaign” in order to “prevent distributors from insufficiently passing on the reduction in the VAT rate to consumer prices”. An inconclusive French precedentIn France, there is no control body to guarantee that manufacturers and distributors pass on the reduction in VAT on the price of products.

Since January 1, 1987, prices have been set freely in France, with exceptions (books, reimbursed medicines, regulated energy prices, etc.). Manufacturers and distributors therefore have no obligation to reflect changes in the VAT rate in their prices. “A trader can take advantage of this to increase his price excluding tax and collect part of the reduction in VAT,” explains Jesus Castillo.

According to the Council for Compulsory Deductions, a reduction in rates “is not systematically transmitted to the consumer and can be captured by the producer”. In July 2009, the government lowered the VAT rate in catering from 19.6% to 5.5%. The Institute of Public Policies was interested, in a study, in the effect of this measure over the period 2009-2014, the year when the rate rose to 10%.

The researchers note that the impact on consumers was limited: "Thirty months after the VAT cut, prices only decreased by 1.9%." While "the profits of [restaurant] owners increased by around 24%", observes the study, which estimates that they "pocketed around 56% of the reduction in this tax". Thus, in addition to not having "brought down all prices", the reduction in the VAT rate does not always benefit the poorest households, but rather the wealthiest, manufacturers and distributors.

Machine-translated from French