03/05/2021

Beware of disguised tax rises

2 min
One of the headquarters of the Tax Agency. Almost two million taxpayers made the declaration the first three days.
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The Spanish government is considering eliminating tax benefits for married couples who file their tax returns jointly, a measure that benefits some two million households right now and which, according to Airef, would have an impact of €2.3bn. The proposal is included in the recovery plans that the Spanish government has sent to Brussels and that should facilitate the arrival of European aid funds, about €140bn. Even so, and in the face of the avalanche of criticism and the elections in Madrid, the Ministry of Finance clarified that it is not considering eliminating of the bonus and that, in any case, it will be decided in the framework of the reform that a group of experts is working on.

In the document sent to Brussels, the Spanish government justifies it not by the impact on revenue, but for reasons of gender equality, since it considers that joint taxation discourages women from entering the labour market. But it seems more like an attempt to mask what would undoubtedly be a covert tax increase, forced in part by the European Union as a condition for receiving reconstruction funds.

It is clear that, due to the deficit figures after the extraordinary expenditure caused by the pandemic (think of the health costs, but also the furlough scheme), the State has to find a way to balance the accounts and collect more. It is a delicate situation because, depending on how it is done, it can punish the lower and middle classes even more and increase inequality. And it would be paradoxical if precisely this government, which boasts of being the most left-wing in the history of Spain, were to harm its voter base

Care must also be taken not to spoil the expectations of an upturn in consumption predicted for when a certain degree of normality arrives and a high percentage of people are vaccinated. Sunday, by the way, will be a step in this direction, with the end of the state of alarm and the possibility of dining out.

In any case, the Spanish government would have to be brave and openly raise the global debate on personal income tax deductions and tax policies as a whole, with special attention to large companies. And not hide such a measure in a report to the EU. As could be expected, the PP immediately criticised it -since the party logically maintains a position against any tax increases-, but so did the left. Specifically, Íñigo Errejón, because he considers that it goes against the interests of the most modest families and those who live in precarious situations.

In the next few hours we will see if the Spanish government finally backs out of this proposal and what explanations it gives. To begin with, it seems more logical that the increase in revenue should come more from indirect taxes or green taxes, in accordance with what Europe is asking for. But the least that can be demanded of government is that it has the courage to explain what the real situation of public finances is.

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