Spanish PM Pledges Personal And Corporate Tax Cuts

by Ulrika Lomas, Tax-News.com, Brussels

07 September 2005

Spain's Socialist Prime Minister, José Luis Rodríguez Zapatero, has promised to cut income tax for both individuals and companies starting in 2007.

Addressing a miners' rally in his home town of Leon, Mr Zapatero announced that next year's budget would contain tax cuts for low income workers, to be introduced in 2007, along with a substantial increase in the state pension next year, and cuts in Spain's 35% corporate tax, which he said would begin after the individual income tax reductions.

However, the tax cuts will be counterbalanced somewhat by a proposal, announced by Finance Minister Pedro Solbes last week, to raise 'sin taxes' on alcohol and tobacco, in addition to petrol duties. Regional governments, particularly Catalonia and Valencia, have also been told by the central government that they must increase local taxes in order to help meet the cost of healthcare. Since taking over the management of hospitals and clinics, regional governments have amassed EUR5 billion in debt to healthcare suppliers.

"Regional governments are reluctant to raise local taxes because that is unpopular with voters. But they must be prepared to share responsibility," a spokesman for the Finance Minister stated on Monday.

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