Spanish Tax Cut Promises Mired In Controversy

by Ulrika Lomas, Tax-News.com, Brussels

30 January 2008

Spaniards are being promised a variety of enticing tax cuts which it may be foolhardy to implement, economists are warning in the run-up to the country's general election.

In a bid to gain re-election on March 9th, Spain's current Socialist Prime Minister, José Luis Rodríguez Zapatero, has attracted much criticism with his pledge to give 13m workers and pensioners an EUR400 tax rebate each.

"There are families who are facing greater difficulties from rising prices, rising mortgage payments, and so I'm committed to making this rebate," Zapatero reportedly stated. "This is meant to stimulate the economy."

However, any such move is likely to make a significant dent in Spain's current budget surplus.

According to the Financial Times, Comisiones Obreras, the country's biggest trade union, branded the rebate proposal as a "blatant attempt to buy votes with public monies".

European Union Monetary Affairs Commissioner, Joaquin Almunia, has also spoken out, urging the government not to make promises which could cause long-term damage to the budget surplus.

"I ask the parties to show moderation," Almunia told one of Spain's radio stations, Onda Cero.

Zapatero began his election campaign by introducing a EUR2,500 tax rebate for each child born in Spain after June 2007.

It seems, however, that these efforts may be paying off, as opinion polls show the Socialist Party are currently ahead of opposition.

Mariano Rajoy, leader of Spain's conservative opposition Popular Party has, unsurprisingly, objected to Zapatero's agenda, claiming in the Spanish media that: "Rodriguez Zapatero is hiding the real economic situation."

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