Spain Unveils Fresh Fiscal Stimulus Package
29 April 2013
Posted by: Author: Ulrika Lomas
Source: Ulrika Lomas
Spain's Council of Ministers has approved the country's 2013-2016 stability program, together with a national reform program, providing for a raft of fiscal initiatives. Neither document provides for a rise in any of the major taxes in Spain.
In the programs, the Government sets out its strategy to redress the public finances, to boost economic recovery, and to create jobs. The approved reforms aim to increase medium-term growth by more than 2%, and assume that 2014 will be the year of economic recovery. This is to be achieved without recourse to a rise in either individual income tax or value-added tax (VAT),
Unveiling details of the Government's proposals, Spain's Deputy Prime Minister Soraya Saenz de Santamaria insisted that the agreed measures are vital to correcting economic imbalances and to exiting the recession. The Minister said that the "great efforts" realized by Spanish citizens in 2012 have enabled the Government to confront "a raft of reforms that will be characterized more by structural reforms than by other adjustment measures." Saenz de Santamaria hinted that income tax might be reduced in the near future.
Furthermore, Saenz de Santamaria underlined the Government's commitment to establishing an Independent Fiscal Authority, to approving a Transparency and Good Governance Act, and to reviewing taxation in accordance with European convergence criteria on environmental taxes and special levies. To support entrepreneurs, the Government plans to implement a number of fiscal measures, including a special VAT regime and tax deductions for the reinvestment of corporate profits or for research and development activities, the Minister revealed.
Defending the Government's fiscal consolidation package, Spain's Finance Minister Cristobal Montoro underlined the "absolute necessity" to reduce the public deficit, to exit the economic crisis. This is an inevitable, unavoidable and positive path for economic recovery, Montoro stressed. Confirming that there will be no rise in any of the major taxes, Montoro indicated that the Government might revise corporation tax as well as indirect taxes, although not those affecting hydrocarbons or the hotel and catering industry.
To guarantee fiscal consolidation, the Government plans to maintain in 2014 the temporary fiscal measures introduced initially for 2012 and 2013, in the area of corporation tax, personal income tax, and property tax, Montoro explained. These measures ensure that large businesses and top income earners make a significant contribution to the joint effort, Montoro argued.
The Government's stability program provides for a deficit of 6.3% of gross domestic product in 2013 (revised upwards recently from 4.5%), of 5.5% in 2014, of 4.1% in 2015, and of 2.7% in 2016.