Awesome story about a theatre in Girona that is selling carrots instead of tickets in order to protest the rise in IVA from 8% to 21%. A nice touch was that they changed the “tickets sold out” sign to “out of carrots”. (In case you were wondering, carrots pay only 4% IVA). The rise in IVA for services activities (where most of the “cost” is for paying human beings) has been a disaster for service oriented small businesses.
In case you were wondering how IVA works, its pretty simple: a business pays IVA for all goods and services it sells, but can get a refund for any IVA that it has to pay. If you work in a line of business that is capital intensive (such as buying and selling stuff), it works pretty well, since you only need to pay for the additional “Value” that you add to the products that you sell.
For a small business that provides a service (such as a lawyer, hairdresser, etc), it’s a whole different world since the primary “cost” is your own time, for which you don’t pay IVA, so no refund for you.
So the hike in IVA has really been a huge tax increase on many labor intensive activities, which you’d think would be a dumb thing to do if there was high unemployment.