After five years of economic growth, Spain continues to register the largest deficit in the euro zone, and on January 1st 2019 we will need to finance more than 500,000 million euros in public spending. The fact is that we have a tax system that this year has generated a record collection but is unable to cover expenses.
The last #VideoanalysisFAES explains the causes of this disparity between the collection mechanisms and the final public revenues. Miguel Marín, from the Foundation's economic area, stresses that collecting taxes does not come free, and that the fiscal measures agreed upon by the Government with Podemos do not respond to any country strategy nor do they encourage investment, innovation or employment.
- Spain has marginal tax rates as high or higher than our benchmark partners, yet we collect comparatively less.
- The idea that the only way to close the public deficit is to increase revenue by forcing existing tax rates or by creating new ones must be disproved.
- Collecting taxes has a cost – they carry administration and compliance costs – they distort the behavior that economic agents would have in their absence, and they drain resources from the economy reducing growth potential.
- Spain needs a fair and efficient tax reform, geared to economic growth and employment; just the opposite direction to that agreed by the government.
Translation by David Outeda