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Holidaymakers face price hike shock in Spain

British holidaymakers heading over to Spain next month will pay more for goods and services, following a VAT rise.

Spanish Prime Minister Mariano Rajoy announced a rise in VAT for ‘leisure items’ effective from 1 September. Holidaymakers booking a last minute deal to the country could end up paying more for accommodation and car hire by not booking in advance. General VAT will rise from 18% to 21% on items including cigarettes and clothing in a bid to save the debt-torn country’s economy.

The leisure rate, which is already reduced, will rise from 8% to 10% and will affect accommodation, food and drink in restaurants, hotels and bars as well as processed food. A family spending £1,000 on an independent hotel, as well as food and drink, will see an extra £20 added to their fees.

Travel industry regulator ABTA said holidaymakers who have already booked package holidays will not incur the additional costs. Those booking accommodation or car hire once arriving in the country are likely to be affected. A family spending £500 on car hire after 1 September will pay at least £16 more because of the 3% VAT increase.

Car hire insurance and car hire excess insurance prices will also increase for travellers. It could be advisable to book this in advance to save money whilst overseas. The Spanish Tourism Commissions has criticised the move, concerned that it would put travellers off visiting. “The tourism sector regrets the government's lack of sensitivity for a strategic sector that is key to kick-starting and accelerating Spain's economic recovery,” it said in a statement.

The number of overseas visitors heading to Spain increased in the first five months of the year and tourism is a strong contributor to the Spanish economy. British travellers also have the benefit of the strong pound against the euro, however, they could make their money go further by booking in advance. If you are planning on hiring a car abroad, consider taking out car hire insurance before you leave.

Date Created: 28 August 2012

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