Spanish Government Commits to Fiscal Reforms by 2025 to Boost Revenue
The initiative aims to increase public revenue by €1.6 billion through adjustments to tax benefits as part of commitments to the European Union.
The Spanish government has outlined plans to reform tax benefits with the goal of increasing public revenue by €1.6 billion, equivalent to 0.1% of the GDP, by the end of 2025. This commitment was presented in the Annual Progress Report submitted to the European Commission, which details the government's adherence to fiscal and economic policy commitments outlined in the Medium-Term Fiscal and Structural Plan.
Within the report, the government states its intention to permanently enhance public revenue through modifications to existing tax benefits.
Tax benefits, which include deductions and exemptions aimed at stimulating certain fiscal behaviors or supporting specific sectors, are recognized as a source of income loss for the government.
The document references a prior evaluation by the Independent Authority for Fiscal Responsibility (AIReF), which identified measures to reduce tax benefits, such as increasing the rates of reduced VAT.
Additionally, it highlights the White Paper on Tax Reform, prepared three years ago, as a significant framework for future fiscal changes.
However, the report does not explicitly address one of the European Commission's long-standing demands: to raise diesel taxes to align them with those levied on gasoline.
The government has faced challenges in fulfilling this requirement due to a lack of parliamentary support, which links its implementation to the fifth installment of European funds amounting to approximately €23.9 billion.
Despite these challenges, the report claims that the promised tax reform in the Recovery, Transformation, and Resilience Plan has been executed, even though initiatives like increasing diesel taxation and imposing new levies on energy companies have not been enacted.
Further, the report indicates that from 2025 to 2028, the income tax (IRPF) will not be adjusted to reflect inflation, a practice previously undertaken by the Ministry of Treasury.
This decision is perceived by the government as a measure to increase taxes and enhance fiscal revenues.
The government anticipates this strategy will result in a revenue increase of 0.1% of the GDP over the three-year period, amounting to approximately €1.6 billion.
In light of rising prices, analyses from various economic think tanks, such as the Foundation for Applied Economic Studies (Fedea), estimate that Spanish households now pay approximately 30% more in income tax (IRPF) than they did a decade ago.
Within the report, the government states its intention to permanently enhance public revenue through modifications to existing tax benefits.
Tax benefits, which include deductions and exemptions aimed at stimulating certain fiscal behaviors or supporting specific sectors, are recognized as a source of income loss for the government.
The document references a prior evaluation by the Independent Authority for Fiscal Responsibility (AIReF), which identified measures to reduce tax benefits, such as increasing the rates of reduced VAT.
Additionally, it highlights the White Paper on Tax Reform, prepared three years ago, as a significant framework for future fiscal changes.
However, the report does not explicitly address one of the European Commission's long-standing demands: to raise diesel taxes to align them with those levied on gasoline.
The government has faced challenges in fulfilling this requirement due to a lack of parliamentary support, which links its implementation to the fifth installment of European funds amounting to approximately €23.9 billion.
Despite these challenges, the report claims that the promised tax reform in the Recovery, Transformation, and Resilience Plan has been executed, even though initiatives like increasing diesel taxation and imposing new levies on energy companies have not been enacted.
Further, the report indicates that from 2025 to 2028, the income tax (IRPF) will not be adjusted to reflect inflation, a practice previously undertaken by the Ministry of Treasury.
This decision is perceived by the government as a measure to increase taxes and enhance fiscal revenues.
The government anticipates this strategy will result in a revenue increase of 0.1% of the GDP over the three-year period, amounting to approximately €1.6 billion.
In light of rising prices, analyses from various economic think tanks, such as the Foundation for Applied Economic Studies (Fedea), estimate that Spanish households now pay approximately 30% more in income tax (IRPF) than they did a decade ago.
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