Cuts and taxes are coming

Cuts and taxes are coming

General idea

As we already know from previous readings, our deficit is unsustainable, and this is synonymous with cuts.

Perhaps the government would have us believe that this will not be the case, that there will be a social response to the crisis, but the truth is that this will be a very distant version of reality.

What is going on?

Since the 2008 crisis, we have had some very big problems in terms of Spain’s deficit, exceeding 100%, spending twice as much as it collected.

It was then when Brussels gave us a roadmap for deficit reduction.

As we already know, we managed to avoid the bailout, except for our financial system, and until 2019 we did not meet even the slightest requirement imposed by the European Union.

It was then that we lost the north, in spite of having a good growth and employment generation, our deficit increased even more, skipping every objective of Europe. Here comes our fundamental problem, and that is that two crises are coming together.

Experts foresee that our deficit will shoot up beyond 10%, thus destroying all employment, wealth and anything else that is put in front of us on a permanent basis.

There are thus two ways out of this crisis, and neither of them is reassuring.

  • The first one we all know well, and it is via taxes and cuts (in pensions, education and public salaries, since cutting health care right now would be suicide).
  • The second way is to refuse to make these cuts and be thrown out of the Euro zone. Here the cuts would be even harsher, as we would end up generating inflation and devalued money.

Assuming the best case scenario (via taxes), there would be many debates about the cuts that our dear government will impose on us to face the crisis, and these seem to be:

  • Tax on large fortunes; thus replacing the wealth tax, where capital from one million euros will contribute 2%, from 10 million 2.5%, from 50 million 3% and from 100 million 3.5%, with the aim of collecting about 13,000 million euros (equivalent to 1% of GDP).
  • Wealth and inheritance; in the event that the tax on large fortunes does not prosper, affecting with 1% the fortunes of more than 10 million euros.
  • IRPF; Raising the marginal rate by two points for incomes from 130,000 euros and four points for incomes over 300,000 euros.
  • Savings; With an increase from 23% to 27% (to the income obtained from investments).
  • Corporations; which will be the largest increase, in which a minimum rate will be imposed on the taxable base from 15% to 18% for banks and oil companies and a tax of 5% of their dividends.
  • Google Tax; Affecting digital companies whose turnover (sales) exceeds 750 million worldwide and 3 million in Spain, with a 3% tax on advertising, online intermediation and sale of data.
  • Tobin Tax; Taxed at 0.2% on the purchase of shares of Spanish listed companies with a market capitalization of more than 1 billion.
  • Diesel; With an increase of 3.8 cents per liter to make it equal to gasoline.
  • Socimis; which will start to be taxed at 15%.

As a subjective opinion, the measures imposed would not help to get out of the crisis, since the population is in a very complicated situation, and there are many families who do not make ends meet, as to raise taxes ….

It is clear that we must reduce Spain’s public debt, but are we really at the right time to do it?

This should have been done long before the COVID era.

In addition, if they finally apply the measures of tax increases, the little investment capital we have in Spain, will leave to another country with better tax measures.

We must be careful because the big capitals are the ones that make our economy work, and if we increase our taxes in an excessive way, they could leave with their money and take it to another country more profitable in fiscal terms, so it would be good to ask ourselves if we are really at the right time to apply these measures.

And you, what do you think?


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