Retail sales fell sharply in September after Spain raised its VAT. The numbers speak for themselves: sales fell 12.6% year-to-year. The last time that the VAT inreased (in June 2010), sales only fell 2.4%, but this time unemployment is higher and continuing to climb.
Consumers are limiting themselves to bare essentials and shopping sales. This explains why those suffering most are small stores. Their sales are down 15.3% compared to big box sales only dropping 5.5%, becaues the latter have a greater margin to offer discounts without losing money. The situation is distressing, and it looks like Spain's goal to raise the VAT and increase tax revenues by 15% will require a substantial amount of work -- or waiting?
