Spain to See Further Tax Hikes
April 30, 2012 Taxation in Spain
MADRID – As protesters across the country continue to stand up against the continued austerity measures, the government of Spain is still looking at implementing a series of tax increases to raise much needed national revenues.
Over the weekend Spain saw an escalation in public protest regarding the plan of the country’s government to implement new austerity measures. The public protest were sparked after the Minister of the Economy of Spain Luis de Guindos revealed on Friday that the government would soon increase the rate of the Value Added Tax (VAT) and would conduct investigations into the feasibility of further changes to taxes.
Justifying the need for the tax hikes, the Prime Minister Mariano Rajoy said that Spain had no alternative such a decision, and he added that the economic system of Spain needs a “deep structural change”.
According to the Minister of the Economy, in next year the government will also instate several increases to the rate of excise taxes on tobacco and alcohol products. The exact size of the increases to the excise taxes and VAT have not yet been determined, but the government hopes to that the new measures will boost overall tax revenues by approximately EUR 8 billion.
Increases to tax rates are not the only measures planned by the government, and they also intend to clampdown on the occurrence of taxpayers claiming welfare benefits while involved in the informal economy and receiving unreported incomes. It is expected that the government will toughen the testing and eligibility rules for unemployment payments, and increase the penalties for those found to be circumventing the rules.
On March 30th Spain is expected to release a new report regarding its GDP levels over the last three months. Amongst economic experts there is a strong sentiment that the results will show that Spain saw a contraction in GDP for the second consecutive quarter.
Spain is currently seeing national unemployment levels hit an 18 year high of 24.4 percent, with youth unemployment exceeding 50 percent.
Last week the country’s credit rating was cut to BBB+ by Standard and Poor’s and to A3 by Moody’s.
Following the announcement of the tax increases, the deputy Prime Minister Soraya Saenz de Santamaria said that “…we are living through perhaps one of the hardest moments for the Spanish economy.”
Photo by Trowbridge Estate