MADRID — In a shock move, the Spanish government announced Friday a dramatic hike on cinema ticket tax from 8% to 21% of sales.

Legit productions and digital TV services suffer the same increase.

Compounding a 12% first-half drop in theater box office, the tax increase looks set to punish still further one of Europe’s most crisis-ravaged movie markets.

Its impact will be felt not only by Spain’s exhibition sector but also in B.O. takings on foreign films — studio and indie alike — plus prices paid by indie distributors on pick-ups for Spain.

The value-added-tax increase lies at the core of a Euros 56 billion ($68.4 million) austerity drive as Spain’s government battles to justify a $121 billion bail-out of its banking sector.

Spain’s Fece exhibition sector were expecting mid-week an 8% to 10% VAT rise.

Reacting with anger to the 8%-21% hike, Juan Ramon Gomez Fabra, prexy of Fece, Spain’s theater owners association, called it a “grave management error,” damaging exhibitors, producers, distributors and actors.

The drastic tax hike compounds Spanish exhibition problems. Total box office grosses, $769.3 million in 2011, have broadly held over the last decade.

But admissions, which determine concessions, plunged from 2001’s peak of 146.8 million to 98.3 million last year, as ticket prices climbed from $5.2 to $7.9.

One reaction may be concerted industry action.

“We fully sympathize with production and exhibition sector reactions to the 8% -to -21% hike and fully support an industry-wide solution,” said Pablo Nogueroles, managing director, Warner Bros. Pictures Intl. Espana.

Possible solutions include ticket price drops, which exhibitors would decide, producers, distributors and cinemas sharing the tax rise hit, or an public awareness campaign to lure back cinemagoers.

Nogueroles also struck out at “slow” implementation of Spain’s new anti-piracy regime, which targets rogue websites.