Economy rules out approving a tax reform to be able to access the fifth payment of EU funds
The Minister of Economy, Commerce and Business, Carlos Body, rules out that Spain is going to have to approve a complete tax reform to be able to access the fifth payment of Next Generation European funds, worth 7.8 billion euros. Body, who appeared when the European Commission made public its approval of the fourth disbursement, has stressed that Spain has improved significantly in terms of GDP collection since the Recovery, Transformation and Resilience Plan was launched in 2021.
In fact, the Spanish Government and Brussels are taking stock of all the measures that have been approved over the last six years to consider this milestone accomplished and, if necessary, “incorporate some element that the Commission European Union seems to be of special interest,” as the first vice president, María Jesús Montero, recently explained at the press conference after the Council of Ministers meeting.
Sources from the coalition Executive recognize that there would be measures to be approved in the field of environmental taxation, where Spain is behind other European partners in percentage of income in relation to the size of its economy. Within the framework of a report on the situation of the Spanish economy published on March 26, the European Commission recommended that the Government eliminate reduced VAT rates, end certain tax benefits and increase green taxation.
In March 2022, the so-called ‘White Paper’ of the tax reform, which the Ministry of Finance requested from the commission of experts, pointed out that Spain had a margin of between 5,941 and 15,023 million euros to raise green taxes. The objective would be to adapt its tax system to the current economic reality and incorporate “environmental, digital taxation and the gender perspective,” they maintained.
Since that tax reform project, the dynamism of the Spanish economy, the resilience of the labor market (which has exceeded 21 million Social Security affiliates) and the effect of inflation have raised tax collection to historic levels. In 2023, tax revenues reached 271,935 million euros, 6.4% more than what was collected in 2022. This increase was recorded after two years of intense growth in tax revenues with the end of the pandemic: they rose more than 15% in 2021 and 14% year-on-year in 2022.
The VAT reduction on food will be maintained
Now, the Government is waiting to fully gauge the effects of the war in Ukraine and the energy and inflation crisis on the Spanish economy, even more so when The rise in prices is proving more persistent than expected. So much so that the president himself, Pedro Sánchez, announced this Wednesday in an interview with TVE his intention to extend the VAT reduction beyond the end of this month. Thus, he intends to take this measure to the Congress of Deputies, where he must gather sufficient support to be able to move it forward.
Although the rise in the most basic products in the shopping basket has moderated significantly since last year, when they shot up 11.8% on averageIn April – the last month for which disaggregated data exists – food and non-alcoholic beverages still rose by 4.7% compared to the same month in 2023. The latest data managed by Eurostat places Spain as the third country in the Eurozone where these goods are most expensive only behind Malta and Greece.
