Spain could hike value added tax (VAT) on products and services currently benefiting from a lower rate to boost revenues and help it meet tough public deficit targets, the Finance Ministry said on Tuesday. Spain's current rate for VAT is 18 percent, one of the lowest rates in Europe, and many products are charged at a reduced rate of 8 percent or a "super-reduced" 4 percent. "The ministry is studying reclassifying certain products and services that have reduced or super-reduced VAT," a spokesman for the ministry said. The European Commission and the International Monetary Fund have both recommended Spain revise the VAT it charges. Some analysts see a significant VAT hike as the only way Spain can meet its commitments to cut its deficit - pledges that will come under further scrutiny since Spain requested a bailout for its banks of up to 100 billion euros ($124.80 billion). Spain charges the 8 percent VAT rate on products like hotel stays, some other tourism products, cinema and theatre tickets. Books, newspapers and basic food products benefit from the 4 percent rate. Changing the categories for products could be a way to collect more taxes while saving political face since the centre-right government of Prime Minister Mariano Rajoy has often said putting up VAT could damage already fragile consumer spending, hurting growth. The government has said it will increase VAT next year but has not given any specific figures.
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