Secondly, the effects of a rise in VAT rates applied to consumption in tourism-related sectors (hotels, restaurants, cafes,
bars and similar services) are analyzed.
As previously mentioned, the Spanish government may be interested in raising the relatively low VAT rates
(7%, with a general VAT rate of 16%) applied to tourist-related services because of several reasons:
(i) the revenueraising potential at low administrative and compliance costs;
(ii) the coverage of extra costs caused by the provision of pure public goods;
and (iii) the initiatives by the European Commission, which may lead to new tax scenarios in the medium term