Things worse than we thought – government rises taxes, admits public deficit is 8% and makes public workers work harder

The new government of Spain has announced today, in its first round of emergency budget revisions after the recent general elections, that the real level of Spain’s public deficit is at 8% of GDP, not the 6% said by the outgoing socialists, and almost double the EU’s maximum limit.

In a first emergency budget modification announced today, Rajoy’s government has rised personal income tax, ranging from an increase of just 0’75% for the lowest level of income to a whopping 7% additional tax on incomes over 300,000€.

IBI (the Spanish version of the UK’s council tax) is also to rise substantially, although this is set and collected by local townhalls. This will apply across the board on your IRPF for this year.

However, IVA on new build homes will remain at 4% for all of 2012, and the government has announced the return of tax relief on primary mortgages, retroactive for this year, a tax that was eliminated by the socialists and which was going to hit middle class families hard.

Tax relief on fuel duty for professional drivers has been eliminated. A number of other little taxes here and there have been modified and increased.

Spain’s public workers will see their salaries frozen for next year, and will also be expected to work longer hours for the same pay, now being asked to work 37,5 hours a week.

An initial 8,900 million euros has been slashed from the national budget, with the axe falling hardest on the development and industry ministries. However, no ministry has been immune from the cuts.

The government has also slashed state funding for political parties, unions, syndicates and other worthies by a flat 20% across the board.

Pensions, however, will increase by 1% above inflation this year.

The minimum wage will remain the same next year, but the 400€ a month additional unemployment benefit for people who otherwise would have no unemployment pay will continue, although the government has indicated it will be looking closely at the way unemployment cover works next year.

The government has also announced that in the 2012 budget it will order the freezing of the basic electricity tariff and it will cancel the blasted canon digital, the digital tax (which levies a flat rate tax on anything that can be used to store digital files on, whether a tv recorder or a DVD).

In other news, the government also announced it will approve a new nuclear waste burying site in Villar de Cañas (Cuenca), something Spain needs but has been dithering about for years now.

(Read more on El Mundo)

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