The new leader of the PP, Alberto Nunez Feio, came to office with a speech that was marked by sharp cuts in taxes, especially in the face of high inflation. In recent weeks, there have been three major proposals in this area: part of the recovery funds will be allocated to deductions for the installation of solar panels, the reduction of electricity VAT to a super-reduced rate, or the reduction of personal income tax due to rising prices. The first two proposals do not depend on the government but on the support of the public authorities. The third raises doubts about the possible regressive impact that will benefit the highest incomes, which PP itself has already condemned when it was initiated by previous socialist governments.
Part-by-part. The new opposition leader last week suggested to Prime Minister Pedro Sanchez that he use 7% of European funds for household investments “under the funds”. He cited the installation of solar panels or geothermal energy as an example to improve the energy quality of homes. The operation proposed by Feijóo would be for the citizen to make these investments and later repay them with a personal income tax bonus, to finance them from European recovery funds.
This proposition arises because of two problems. First of all, the technical doubts raised by the government as to whether it is legal to use this model of European aid distribution. “I think it can be done,” Feio said in an interview with Cadena SER last week, in which he acknowledged that the president was “skeptical” of his viability.
Secondly, the households implementing these reforms already have access to tax breaks, even if this is not done through European funds. In fact, the revenue campaign, which began last week, already includes a personal income tax cut, such as the one proposed by Feio if any work has been done to improve energy efficiency from October 5 and will continue throughout the year. Those who implement these reforms in 2022 will also benefit.
Specifically, an equivalent deduction of 20% of the investment is established if energy consumption is reduced by 7%, up to a maximum of 5,000 euros. There is another step, with a 40% discount, if a 30% reduction in energy consumption is achieved and the house is labeled “A” or “B”, up to a maximum of 7,500 euros. The third step, 60%, concerns investment in comprehensive energy efficiency reform of residential buildings.
The second proposal of the new popular leader concerns VAT on electricity and gas. The government last year already approved a temporary reduction in VAT, which extends from the overall rate of electricity tax (21%) to the reduced rate (10%). Feijóo PP now suggests that this reduction be continued at a super reduced rate (4%). However, this idea presented to the government does not depend on the Ministry of Finance, as the use of this reduction must be approved by the European Commission. The popular leader himself admits that he will need this approval to use it, though he insists on protecting its viability.
Fayyou has repeatedly cited Poland as an example, a country that has been justified in recent weeks by announcing drastic cuts in indirect taxes. However, the decision by Poland, which focuses specifically on gasoline taxes, was made without the consent of the European Commission, which is already analyzing the situation as it was “unilaterally”, Newtral reported last week.
Other countries, such as Portugal, tried to apply similar measures and eventually had to cut other taxes where state opportunities existed while waiting for the VAT reduction in Brussels.
The third of the proposals is a reduction in personal income tax. Feijóo proposes to restore a concept that has not been used in Spain for more than ten years: reducing personal income tax rates. This term refers to the reduction of personal income tax related to inflation. It is justified by the fact that an increase in wages below the CPI may lead to a change in the income tax scale and, at the same time, an increase in taxes to be paid without a real improvement in purchasing power. Feijóo suggests using this event from the beginning of the year, retroactively and temporarily. This, in his estimation, meant about 4000 million euros.
This is not a new proposal. Ciudadanos took him to Congress in March and the PP backed him, though he rejected them against PSOE, United We Can, EH-Bildu, Junts, More Country, CUP, Teruel Exists and Compromís. It is a measure that, on paper, seeks to prevent a taxpayer from paying more tax without gaining purchasing power.
However, the general statement – Feijóo did not elaborate on the details of this proposal – means greater benefits for those who earn more, to the detriment of low-income people. In other words, it will be a regressive measure that will benefit those who receive more than those who receive less.
This is what the PSOE used to reject the proposal submitted by Ciudadanos. “The proposal has very good music but very bad lyrics,” Socialist MP Antonio Hurtado assured Congress. “This is a regressive measure, because those who pay 12,000 euros do not act, who benefits? Those who pay 60,000 and 300,000 euros,” he said.
This idea of regression was, in fact, used by PP itself when in 2004 the PSOE proposed personal income tax deflation for next year’s budgets. This was one of the last cases. During his seven years in government, PP never linked his personal income tax to the CPI.
The government, through Finance Minister Maria Jesus Montero, has repeatedly addressed the idea of tax cuts in Spain, despite proposals from the main opposition party. “Tax cuts are not always, almost never, an appropriate response to the situation in the country, as it affects citizens unequally,” the minister said in an interview with Six on Monday.
“We need to be serious and tough on this issue. The government, realizing that it can contribute, has reduced taxes,” he added. “I remember the words of my colleague, Mr. Montoro, that obviously it was not a policy he shared, nor an adjusted economic policy when inflation was on the rise,” he ironically responded to the proposal for personal income tax deflation. .
These three sentences and their difficult use were not the only titles that Feio left behind after he decided to leave for the leadership of the PP. One of the most notable was when he accused the government of “enriching” the rise in electricity and gasoline prices. He missed a rally in front of the party’s primaries in the event that the increase in revenue generated by the state through price increases also affects autonomies such as the Xunta de Galicia itself, which he himself continues to chair.
In particular, autonomous communities receive 58% of the special tax on hydrocarbons and 100% of the special tax on electricity, as well as 50% of VAT. Asked in the SER last week about the issue, the still-Galician president accused the government of “storing” collections for two years before handing them over to communities, ignoring the fact that regional governments will take payments into account for this year’s revenue forecast. Which corresponds to them this year and which was already projected to grow by 6%. “We will get it in two years, while it will be spent on what it deems appropriate,” Feio said.
At the same time, when PP accused the government of not wanting to cut taxes, he criticized the state’s high deficit and public debt, reflecting a forced reduction by Brussels in the future, a situation that tax cuts would exacerbate. Spain closed 2021 with a deficit of 6.76% – well below the forecast of 8.4% – and hopes to reduce it to 5% by the end of this year, which was this year’s budget, and which the executive expects to meet despite a shock plan to help with the war. Against the consequences.
Although fiscal rules requiring a deficit of less than 3% have been suspended in Europe and it is unknown when and how they will be reused, the state will still have to carry out a significant rebalancing of accounts in the coming years. If he backs a significant reduction in revenue – Feio proposes a personal income tax cut of $ 4,000 million, while his party cuts fuel cuts by about $ 20,000 – a deeper cut in government spending will be needed – which it is. The vast majority of it is allocated to social spending – which is not explained in detail by the main opposition party.
Source: El Diario
I am an experienced and passionate journalist with a strong track record in news website reporting. I specialize in technology coverage, breaking stories on the latest developments and trends from around the world. Working for Today Times Live has given me the opportunity to write thought-provoking pieces that have caught the attention of many readers.
