Tax changes which are likely for next year?

An interesting opinion piece in El Mundo appears on the tax decisions the Spanish government will have to take in the next budget. You can read it in the original here or here’s the Google translate version:

The growth of the economy, on the one hand, and the need to win over the electorate, on the other, will set the government pace of tax reform, who is preparing a committee of experts. But the final decision will end up in the hands of Cristobal Montoro. The Finance Minister needs to find the pieces to reform -ie, increase- rather than decrease tax revenues.

Sources close to the Executive recognize that ‘is going to play with all the cards’, particularly income tax, because the tax model based on labor income has reached its self from the point of view of tax collection. Especially when the labor reform is destroying the progressive tax, facilitating pay cut.

Therefore, in addition to changing the removal of some deductions for an improvement in the rate corporation tax, tax collection is to find new niches in line with the recommendations of international institutions. Specifically, the government wants to follow the last advice of the IMF says that “Spain has room to raise taxes on large fortunes.”

Income Tax

The intention of the Executive is to perform a tax cut “important” to offset the rise in 2012, with a drop in price over the lower reaches and particularly in middle-income, where the greatest number of taxpayers is concentrated. Specifically, under lower tax bases at 12,000 euros is 40% (7.7 million) of respondents, although their just dues revenue generated by the game of reductions and family and personal deductions.

Meanwhile, in the middle-income segment concentrates 57% of taxpayers (11.1 million). Therefore, although depend on the evolution of the economy and income in 2014, is intended to benefit these rents, which are holding income and the highest capacity consumption and saving.

However, for high incomes, from 60,000 euros, no news is expected. Represent just over 3% of respondents (less than 700,000 people), but account for 17% of all the tax bases and provide 33% of fees collected. It is possible that the rate brackets are changed to wring average incomes who earn about 60,000 euros as at present most of the funds raised in the highest income group corresponds to those contained between 60,000 and 150,000 euros.

The estimated cost of this reduction-that is, the savings to taxpayers-will be between 3,500 and 4,000 million, a figure slightly below the revenue collected by the rise of 2012.

But there may be more news to offset this loss of revenue. The Government wants to open the debate on the abolition of retroactive deduction for housing. It may be general or income brackets. This decision “will be very thoughtful,” say these sources, it is the only deduction that have average incomes. And besides, there are now 5.8 million people who apply it. Its cost is gradually reduced to 1,800 million provided in 2014 by falling mortgage rates and the disappearance of the deduction to new investment from 2013.

Societies

You will continue the reduction of deductions that businesses, particularly large apply. The Government wants to increase the taxable base impossible to raise revenues in exchange for reduced rates. Even, it is possible to set a fixed rate, at around 15%, to avoid paying tax on a lower effective rate.

The discussion will concentrate on suppressing the current deduction of 100% of international double taxation of companies. That is, the intention is to remove the bonus of partial exemptions from corporate income abroad. Those are intended to pay higher taxes in Spain. Thus, it is intended to follow the footsteps of other regulatory countries to avoid the low taxation in the country.

VAT

Although the commitment no longer offers the guarantees, Rajoy has already announced that it will not go higher VAT rates. But still there is room to place the general tax at 23%. However, the government wants to defend politically not upload rates. Therefore intends to follow the recommendation to reclassify products Brussels. The argument is that it makes little sense that only half of the consumption basket of goods and services is subject to the general tax rate (21%), as for example in Germany reaches 85%, and the other half is distributed between the reduced rate (10%) and the super (4%). Furthermore, Spain, which is one of the countries least raises VAT, is the most products and goods that have taxed super-reduced rate. This change would be a substantial increase in the indirect tax collection.

Special

In this chapter there is much more room. Also it is called silent taxes because the city does not receive both the rise. Although this is changing. For example, now it seems that, after the rise in alcohol taxes, consumers now drink more beer than spirits to avoid the rise. Something similar has already happened with the rise of snuff. It is touching and unify all the figures of this tax, and that the increases do not produce an overall rejection on its potential health effects. In this set would come a new generation of environmental taxes in line with those who now come into force in the law of energy taxation.

Modules

It aims to reduce ‘maximum’ this system, in which live a million self-employed. This group can not be inferred that support the bills. But instead it can issue them, creating a snowball effect in the fraud for business. The intention is to simplify its accounting for this group is to pass or objective estimation that chooses become a limited company.

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