Mathematical Puzzles and IVA, Spain's VAT

Spain has a VAT (Value Added Tax) of 18 percent, called IVA. That sounds high until you consider that Denmark's VAT is 25 percent. These make 7 percent or even 11 percent sales tax rates sound almost silly. But there are two differences in sales tax in the U.S. and the IVA I pay in Spain. The first difference is that IVA is charged by only one jurisdiction in Spain--the national government. In the U.S., on the other hand, sales tax can be charged by the state, the county, the city, or all of them--or some other government entity that you don't know about. Then, too, the sales taxes and various usage taxes can easily add up to 18 or maybe even 25 percent--as I am reminded every time I check out of a hotel at a conference.

The second difference in taxes is that in the U.S. consumer prices are listed without the tax, so that you generally get a receipt that shows the price of the item and the amount of the tax imposed on it, which adds up to a price that is probably higher than you thought and certainly higher than you wanted. In Spain, and everywhere that I know that uses the VAT, the displayed price of the item includes the tax. From the price you pay, the merchant presumably computes and sends the appropriate amount to the tax authorities. You don't have to think about it and you may not even know what it is. It makes it much more tolerable to pay a higher tax if the amount you are paying is not constantly thrown in your face.

Still, I noticed awhile ago that some grocery stores that I frequent include information on the receipt showing how much tax was charged. So I have been saving my receipts and trying to figure out the Spanish IVA taxation. Underneath the cumulated purchase total (the total), the amount you tender (the efectivo) and the change you get (the cambio) is a little chart like the one below.

BASE     IVA     CUOTA     IMPORTE
2,76        8         0,23           2,99
2,53        18       0,45           2,98
3,25        4         0,14           3,39

Looking at charts like this were probably what first made me aware that not everything was charged at the 18 percent rate. Some items were apparently charged at 8 percent; others at 4 percent. Of course I wondered which items belonged in which group.

It is not as easy to find out as one would think. Remember, the displayed price includes the IVA, and the real item price (the base, as I learned) is never shown--except on this receipt. When I had accumulated enough of these little receipts and finally remembered to examine them at home--and got out my calculator and magnifying glass--I confirmed that the cuota is the amount of the tax on its corresponding base, charged at the appropriate IVA rate. The importe is the sum of the base and cuota and would be the amount shown as the price of the item, if I had only bought one item in this category. Of course that seldom happens, so the game on the way home from the grocery store has become figuring out which items purchased add up to the amount of each importe, because if that can be determined I will know which items are taxed at which rates.

One day this week we went out just to buy water, and we came out of the store with only 11 items. That's a workable number, especially since there were five bottles of gaseosa (1,5 liter bottles of flavored water) at 26 centimos each and two cartons of milk at 1,22 euros each. Add to that a bottle of white wine at 1 euro exactly and one of red at 1,98. Then the fresh mushrooms at 95 centimos and the luxury purchase of Caesar salad dressing at 1,69. So I was able to figure out which items added up to the importe in the three categories above. 

This is the point where, if you are so inclined, you should do the math before scrolling down for the answer.








Here is a review and a clue:

18 percent. The normal or default amount, applied to every consumer purchase unless specifically exempted.
8 percent. Applied to alimentary and sanitary products, for animals as well as humans. Specifically excluded from this category are alcoholic beverages, soft drinks, tobacco, cosmetics, and products of personal hygiene.
4 percent. For items of "basic necessity," specifically
    - Bread and "cereals" for making it.
    - Milk, cheese and eggs. 
    - Fruits, vegetables, legumes and natural root vegetables.

The answer:

• The wine was charged at the default rate of 18 percent. Not a surprise.
• The gaseosa was charged at 8 percent. This is where I learned that gaseosa is apparently considered  water (even though carbonated and with some flavoring) rather than a soft drink (refresco), which would have been charged at 18%. Also charged at 8% was the bottled ready-made salad dressing, which surprised me, because I consider this a luxury rather than a regular food item (you can probably tell that this is not my salad dressing).
• Both milk and mushrooms were charged at 4 percent, as basic necessities.

I had accumulated lots of other receipts, so I took this opportunity to look through them to see if I could learn any more about the differences between basic necessity 4 percent items and the normal food rate items at 8 percent. The "cereals" for making bread do not include oatmeal or corn flakes--I guess they mean that "flour" is 4 percent. But cat food is charged at the same rate as general people food--I'm sure that Goldie approves. And fresh fruits and vegetables--of which I buy many--are 4 percent, though canned corn is 8 percent. The store where I buy most of my frozen vegetables doesn't provide this nice little accounting, so I don't yet know whether frozen is better (taxwise) than canned. On the other hand, that store tells me how much I would have spent in the old currency of pesetas! I hope that is information I never need to use.

The good news is that some eye drops I bought at the pharmacy also are just 4 percent and that food and drink consumed at a cafe, bar, or restaurant seem to be just 8 percent, regardless of whether alcohol is involved or not, though it may take a little more research to verify that. I was pleasantly surprised to see that my 4 percent purchases were a substantial part of my grocery basket, and now I can create a little game to try to keep those high, because they obviously are applied to foodstuffs that are not only basic but nutritious. By the time I went through most of my receipts, however, I had a headache and had consumed most of the afternoon. It's now almost dinner time, and I'm going downstairs for an 18 percent beverage.

Signs of Autumn

Someone mentioned that the British use "autumn" while Americans use "fall" to denote the season that comes after summer. I haven't really observed that yet in my verbal encounters with the Brits here in Spain, though my Diccionario Cambridge Klett Compact confirms that the translation of the Spanish otoño is "autumn, fall (Am)." I have always preferred "autumn" because "fall" seems so, well, happenstance. Autumn is a destination--you don't just fall into it when summer gets tired. One thing is sure: we are all tired of summer now, at least those of us who have been here for the past several months. Those who escaped to northern European climes for July and August and are now returning to the Costa appreciate the still-high temperatures, since they have been experiencing cold and rainy weather for much of the summer. But I'm not here to talk about climate change.

 Nearly all with whom I email have spoken to me with pleasure of cooler days and that wonderful crisp feeling in the air that autumn brings. It's cooler in the morning and later in the evenings here too, now, and it's dark in the mornings until 8:00 and gets dark again less than twelve hours later. But temperatures still register in the 90s F. at lunch time on the thermometer in the shade outside the sun room. My office air conditioner is broken, sending out hot air instead of cool, and I waited several days last week for the repairman to fit us into his busy schedule, and then he didn't come on Thursday afternoon between 5:00 and 6:00 as promised--or on Friday, either. So I do not yet feel like fall, but I am definitely looking forward to autumn.

There are signs. The returning northern Europeans, for a start. Our petanca games are filling up with people again compared with the sparse participation in the summer. Other social activities are starting up and the calendar is getting lots of notations. And I wondered this morning whether the grocery store would be open today (it's allowed to be open on Sunday during the summer only) but then remembered that I can count on today and next Sunday, through the month of September.

The surest sign of autumn for those of us who live on the northern side of the equator is the beginning of school, and school has started. First come the vuelta al cole ads in the circulars and large placards in the stores, announcing special prices on supplies, clothing and whatnot for the return to colegio, which is primary or elementary school--not college--in Spain. And then comes the start of school itself, September 8 according to one friend with two youngsters who attend, but it must vary a little bit from town to town.

Last Monday I happened on to a small colegio in Rojales at 12:25 PM. About 20 people were standing around the gated entrance. A few men, many women, some young and fashionable, a couple older, in Spanish grandmotherly style. Two women in light-colored abaya street-length cloaks and hijab headscarves. They were all waiting for their children to be released from school for the day, and within a couple minutes of my walking back to stand on the other side of the street after we parked the car, here they came. Tiny, happy children, with big smiles on their faces, walking out two by two through the school courtyard and each one greeted by a parent or grandparent or other caregiver. I asked and was told that yes, indeed, this was their very first day at school. They couldn't have been more than four years old. They soon walked off with their escorts--there were only a couple waiting cars--and that was the end of this first school day. They had had an exciting time, and there was still a long afternoon to enjoy in the sun.

Every day this week I have heard the reverberations of the big school bus that transports a few children from our neighborhood to and from their colegio in the center of Algorfa, a few miles away. It comes at precisely 1:25, on its return-from-school trip. I have not heard it yet on its regular afternoon run. Afternoon school sessions only start when cooler weather comes, presumably in October.

The Foreign Community Speaks English

I always have a stack of newspapers beside the bed for night time reading, and last night just before I dropped off I was reading the latest Spaniaposten, a Norwegian bi-weekly. The article that caught my eye was a short one reporting on another article from the regional (Valenciano) newspaper Información. The subject was the large foreign (non-Spanish) population on the coast immediately south of Torrevieja and the fact that English is the predominant language. It was an interesting article and I will offer my translation from the Norwegian:
________________________
Orihuela.
NEWSPAPER CRITICAL OF LACK OF INTEGRATION

The large number of foreigners who live here and their lack of interest in learning Spanish have changed many areas in Vega Baja, especially Orihuela Costa, to more of an English colony than a Spanish area.

So begins an article in the regional newspaper Información. Almost 30,000 foreigners are registered as resident in this area a little south of Torrevieja.

MOSTLY BRITS
The largest group is the British, followed by Irish and Germans. Scandinavians also make up a large part of the immigrants and vacationers on this part of the coast.

OWN COLONY
The Spanish paper writes that immigrants integrate themselves here only to a small degree. The majority of foreigners create their own colonies, shopping in stores managed by their own countrymen where they can speak their own language, and they have little interest in learning Spanish as long as the foreign community can communicate among themselves in English.

USE ENGLISH
Local businesses use English to attract vacationers and residents from many of the large developments found in the area. Información writes that the area is full of "supermarkets," "grocery shops," "restaurants," and "irish pubs." [sic] Few establishments use Spanish to advertise their specials. The lack of use of Spanish in the area has made it almost obligatory to be able to speak English in order to get a job in the area, the paper goes on to say.
________________________
That is (my translation of) the article in Norwegian describing the Spanish article for its own readers (there are thousands of Norwegians along the entire Costa Blanca, plus many Swedes and Danes, and the odd non-Scandinavian person who can understand one of those languages). My reading suggests that the Norwegian article was offered without judgment or comment.

This morning I decided to find the original Spanish article and see whether it was equally non-judgmental.
Spaniaposten did a good reporting job, I think, but the original article was longer and had a few other tidbits.

To begin with, I like the Spanish title and lead:

With an English Accent
Tourists and residents along the coast of Orihuela hardly know what Spanish is.

The article goes on to say that Orihuela Costa is a small piece of Europe, but more international than many European capitals. In addition to what was reported in Spaniaposten, the original focuses on the need for Spaniards to learn other languages--English at the least--in order to get any job dealing with the public and mentions that a media explosion of periodicals, websites, and radio in several languages is burgeoning. Finally--and one wonders why Spaniaposten does not mention it--several lines were devoted to describing free Spanish courses starting in mid-September in the town of Pilar de la Horadada, on a basic and intermediate level, to promote "faster integration."

Well, integration may be beyond the range of possibilities, but it's obvious that many municipalities are stretching themselves to offer language courses to expose foreigners to even a little Spanish. We don't live on Orihuela Costa, but we live within a half hour of it, and there are probably nearly as many foreigners in our inland area. I'm still waiting to hear from my town about when this fall's language classes will start, even though they are not free. It is true that one has to work to expose oneself to native Spanish-speakers in this part of Spain. A "peculiar situation,"indeed, as Información calls it.