No Room For Tax Hikes In Spain This Year

by Ulrika Lomas, Tax-News.com, Brussels

15 July 2009

Proposals to hike taxes in Spain have been rejected by Spanish Economy Minister Elena Saldago. In an announcement Saldago underlined that there was no space for any changes to tax policy, and that proposals would be considered in September 2010 after the full effect of both the crisis and the government’s stimulus package had been felt.

Saldago explained that in order for the economy to grow ‘very weakly’ in 2010 and begin to recover ‘more quickly’ in 2011, the government would need to be prudent with regards increasing the burden on businesses and individuals.

She rejected proposals to cut social security contributions and increase Value-Added Tax, stating that domestic demand remained the weakest area of the Spanish economy. The government has already introduced measures to increase consumer consumption in the form of a EUR400 income tax break, but alike many other developed countries, it also increased taxes on petrol and tobacco.

Parliament’s request for an increase to the tax burden of Spain’s highest paid was also denied by Saldago, who pointed out that it would only have a marginal effect on revenues given Spain’s already largely progressive tax system.

According to statistics released by Spain’s National Statistics Institute in April, unemployment reached record highs during the first quarter of 2009, with 17.4% of the populace without work. Spain’s budget deficit is expected to amount to 9.5% of GDP in 2009.

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