Spain is hunting around for ways to avoid a whopping EU fine for having broken government financing rules, and hence a change to corporation tax has been announced. But it’s complicated and somewhat fussy way of doing things, and designed just to bring in more money for 2017.
The 2012 change to corporation tax will be modified again. Large companies will be expected to pay a percentage of the tax on expected profits in advance on their annual tax declarations. If they over-pay, they can apply for a compensation on the following July’s tax return.
The government hopes to bring in an additional 6 billion euros via this method, along with an addition billion from a crack-down on tax fraud, and a further 1,5 billion by paying lower interest on government debt.
If Madrid can’t convince Brussels tomorrow that they can bring the public deficit under 3% of GDP they’re in line for a massive fine.
Spai dropped corporation tax to 25% in the hope of stimulating the economy. But income from this tax has dropped dramatically – in 2007 the state bought in 44.8 billion from this tax, last year just 20.6 billion. It’s a nasty hole in the finances.