In January, The Consumer Price Index Showed A Value-Added Tax On Sugary Drinks

2021-02-12   |   by CusiGO

Two tax increases approved by the government have been reflected in the price of shopping baskets. In particular, the increase in value-added tax and insurance premium on sugary drinks increased by one tenth of the consumer price index in January, which was 0.5% (one tenth lower than the data released by the National Bureau of statistics at the end of this month). If taxes remain unchanged, inflation will reach 0.4%, according to data released by the Bureau of statistics on Friday.

Ine provides two series to track the development of CPI. General series and constant tax series. By comparing the two, we can see the impact of the two tax increases in the national general budget which came into effect on January 1. According to the National Bureau of statistics, these two fiscal developments contributed one tenth of the rise in the inflation rate in January, because the consumer price index (CPI) in January was 0.4%, and overall (including growth) was 0.5%.

For sugary drinks, their VAT was raised from 10% to 21% on January 1. The executive believes the goal is to promote healthier habits and hopes to raise about 300 million euros a year. The tax increase has affected the sales of these products in supermarkets, although bar and restaurant consumption is still subject to a 10% tax to avoid damage to the catering industry. Therefore, in January this year, the category of soft drinks increased by 10.2% over the same period last year, 8.7 percentage points higher than that in December. Among the fixed tax rates in series a, the growth rate in January was still 0.8%. This makes the tax rate for a group of goods including soft drinks, food and non-alcoholic beverages 1.4% in series a and 1.7% in general.

The increase in premium tax from 6% to 8% is not obvious, which may mean that in the case of e-Car, the third party will increase by about 6 euro per year, and in the case of family insurance, it will increase by about 4 euro per year. As a result, inflation rates for housing related insurance (+ 2.9%), health-related insurance (+ 5.2%) and motor vehicle related insurance (- 1.3%) remain constant throughout the series and constant tax rates. However, the “other insurance” category, including civil liability insurance, death insurance or electronic equipment insurance, increased from 1.1% in series a to 3% in general series. As a result, insurance groups, that is, insurance groups for other goods and services, account for one tenth of the whole series, up to 1.1%, while taxes remain unchanged, at 1%.

In any case, after nine months of negative effects caused by the pandemic, the biggest impact of the return of inflation to positive in January is the strong growth of electricity. In January of this year, one of the most severe cold waves ever appeared. In the past few days, the cold wave has brought the wholesale price of electric lights to a peak of about 90 euro per megawatt per hour. Although later, at the end of the month, prices fell to their lowest level, and although these fluctuations are not fully reflected in household bills – consumption is only a third of income – the balance is rising. Electricity prices are up 15.1% from the same period last year, according to the National Bureau of statistics. This is nearly 10 percentage points higher than last December. This growth led to a rise in the number of people, including housing and lighting, from a negative growth rate of – 0.1% in December to 3.2% in January.

Other energy products also have different performances. As a result, household energy products such as natural gas (- 3.9%), butane (- 0.1%) and other fuels (- 22.7%), as well as transport related products, gasoline (- 7.2%) and diesel (- 11.4%) decreased compared with the same period in 2020. However, they have made a positive contribution to the rise of the CPI because they all have an upward trend, that is, the negative growth rate in January was lower than that in December and the previous months, when the impact of the pandemic crisis was more serious. In fact, the ratio of transport groups, including gasoline and gasoline, was – 3.2%, compared with – 4.4% in December.