Rajoy reading massive tax break for families ahead of elections

As is usual in Spain, voters are rubbing their hands preparing for the election bribes, and this year will be no exception – Rajoy is preparing a 4,5 billion euro tax cut for families ahead of next years elections.

It’s similar to the 400 euro cut that won Zapatero his last elections, but is expected to be applied in a different manner to avoid pissing off Brussels.

Manuel Lagares is heading up a Commission of Experts in charge of reforming IRPF (income tax) in Spain, which is due to report back this year ready for 2015 (when national, and many autonomous elections are being held). Manuel wants to completely reform IRPF and has apparently been authorised to take “one step beyond” a cosmetic tinkering.

He’s expected to balance out the tinkering by juggling IVA around – moving a lot of products from the 10% to 21% tax band.

Families and low earners will be the ones who gain the most under the proposals. Tax credits will be applied depending on your deductibles, meaning these categories will see large scale savings on their tax bills.

Tax bands in Spain (click for the original, Spanish article from Voz Populi)

THere are a few obstacles to this strategy: for example, last year 70% of Spanish tax payers declared annual earnings of less than 42,000 euros.

% of Spanish declarations by tax band

So where are the savings going to come from?

Well, at the end of the day the government is going to make some popular cuts in exchange for hidden rises: so maybe they’ll get rid of the tax cut for having a mortgage, for example. Or increase taxes on second homes / homes rented out for tourist uses.

We’ll find out as the year progresses….

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