Acceleration by tax

Spain will reduce income taxes to stimulate economic and consumption growth

The Government of Spain, as expected, can finally approve on Friday the project of the next tax reform in the country, which will be transferred to the national parliament. Its goal is since 2015, to accelerate economic growth by reducing a number of basic taxes significantly increased two years ago for anti -crisis reduction of budget deficiency.

Since 2008, Spain has been undergoing a deep economic crisis . Many enterprises went bankrupt, almost a quarter of the able -bodied population of the country was left without work . Accordingly, tax revenues to the treasury were reduced with the simultaneous growth of its social expenses, including unemployment benefits.

The deficiency of the Spanish state budget sharply grown as a result - in 2011 it amounted to almost 10% of GDP, that is, three times more the limit established for the Eurozone countries - began to threaten the government with default for its own debt obligations, which managed to avoid strict measures to save and increase taxes - direct and indirect. Now, the growth of the Spanish economy has resumed, and unemployment began to contract.

For example, we prefer to charge less income tax, but - with a large coverage of working.

The general situation in the economy has improved somewhat , which makes it possible to reduce taxes that, in accordance with the financial stabilization plan, had to be significantly increased, the Minister of Finance of Spain said Christobal Montoo : “It will be reduced both income tax and income tax and enterprises. At the same time, the value added tax remains unchanged.”

In Spain is a progressive income tax scale: the more a person earns, the higher the rate for him. The minimum tax - from income not exceeding about 1.5 thousand euros per month - is almost 25%. Now this rate is proposed to reduce to 19%. For people with maximum income - more than 25 thousand euros per month - it will decrease from the current 52% to 45%.

For earnings in the range from about 8 thousand euros per month to 12.5 thousand euros, payments in the form of income tax, on the contrary, will grow, but not due to the increase in the rate, but due to the abolition of some previous benefits. Nevertheless, on average, the income tax rate in Spain over the next two years should decrease by 12.5%.

At the same time, the authorities plan to reduce the income tax of enterprises - from 30% to 25%. For comparison, the average level of its rate in the countries of the European Union slightly exceeds 23%.

In any case, the treasury at first may have difficulties with a further reduction in budget deficit.

The proposed reform is both important and useful, given that emergency measures in the form of increasing taxes in 2012 were taken extremely painfully, says the professor of economics of the University of Madrid Salvador Ruis Galud . “Everyone will benefit from the reduction of taxes, but more than others - persons with high incomes. After all, it was these people who were in due time not overlap with high taxes - up to 52%, which many even called“ robberies ”.

The upcoming tax reduction, the government claims, is not just a step towards the population. The authorities consider this, first of all, as a measure of stimulating economic growth. The country is gradually out of the crisis. The recession of GDP is stopped. This year, even its small growth is planned - by about 1%.

However, the Spanish economy needs additional incentives, including tax, many experts are sure. So, a decrease in income tax on enterprises will allow them to develop faster and create new jobs. Well, a decrease in income tax will increase the income of the population, will lead to an increase in its demand, which will also affect economic activity.

Both income tax and income tax of companies and enterprises will be reduced. At the same time, value added tax remains unchanged.

The main goal of the upcoming reform is to force the tax system to work for economic growth, the expert of the Madrid Center for Social and Political Research of FAES Miguel Marin notes. “For example, we prefer to levy less income tax, but - with a large coverage of working, that is, those who, as a result of the resumption of economic growth, receive jobs and will be able to pay to the treasury.”

Nevertheless, the declared plans of this reform caused criticism from the experts of the European Union. They fear that such a significant decrease in taxes, so far, is not supported by the creation of an adequate number of new jobs, can lead to a new reduction in tax revenues to the treasury. And as a result, Spain will not be able to fulfill promises to reduce the budget deficit within two years to 3% of GDP - the maximum permissible level established for the countries of the Eurozone. Last year, the deficiency of the Spanish budget amounted to almost 7%.

The main goal of the upcoming reform is to force the tax system to work on economic growth.

To what extent the expected increase in economic activity can compensate for the direct losses of the treasury from the alleged reduction in taxes? After all, this, in general, is the law of the economy, says Professor Salvador Ruis Galud: “The whole question is in terms. I hope that we are talking about months, not about years. But in any case, the treasury at first may have certain difficulties with a further reduction in budget deficit.”

The initiator of the next tax reform in Spain - the Minister of Finance Cristobal Montoro - does not doubt the effectiveness of the proposed measures he proposed. And it claims, in addition to the fact that its department has an additional source of income - a “shadow” economy. In Spain, according to various studies, it accounts for at least a quarter of the total GDP.

The Ministry of Finance believe that tax reduction will contribute to the exit of the business from the “Shadow”. Well, to those who do not want to get out voluntarily can “help” the competent authorities in this. Their structure this year was significantly strengthened in Spain. Minister Montoero claims that such a measure is already giving an effect - in the form of additional taxes from a business that had previously remained in the “shadow” economy.