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EU Concerned Spain Won't Meet 2016 Deficit Target

by Ulrika Lomas, Tax-News.com, Brussels

16 October 2015


The European Commission has said that Spain will not achieve its goal of cutting the deficit to 4.2 percent of gross domestic product (GDP) next year if the measures outlined in the recently released draft 2016 budget are implemented.

In its draft budget, Spain expects its deficit to decline to 4.2 percent of GDP this year and 2.8 percent in 2016, in line with recommended targets under the European Union's procedure for reducing excessive deficit levels in its member states. However, the EC forecasts that Spain's deficit will decrease to 4.5 percent of GDP this year and to 3.5 percent of GDP in 2016, not meeting the target for correcting the excessive deficit by 2016.

The Commission therefore said that Spain's draft budget is at risk of non-compliance with EU rules. It urged the Spanish authorities to strictly execute the 2015 budget and take the necessary measures within the national budgetary process to ensure that the 2016 budget will be compliant with EU rules. It also called on the authorities to present an updated draft budget, including fully specified regional measures, as soon as possible.

Despite the concerns raised by the EC, Finance Minister Luis de Guindos remains convinced that the Government will meet the 2016 deficit target without needing to amend the budget.

In July this year the Spanish Government implemented reforms designed to boost tax revenue by 6.2 percent in 2016. The reforms included changes to the personal income tax rates and thresholds and reductions in the corporate income tax rate.

TAGS: compliance | Finance | tax | economics | European Commission | fiscal policy | gross domestic product (GDP) | budget | corporation tax | tax rates | Spain | tax reform | individual income tax | Europe

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