May 16, 2021

Sanchez forecasts a record revenue in the Budgets to finance the rise in social spending | Economy

Sanchez forecasts a record revenue in the Budgets to finance the rise in social spending | Economy


One of the few pleasant surprises that María Jesús Montero encountered when she was appointed Minister of Finance in June and settled in the old Customs house on Calle de Alcalá in Madrid, was the good progress of the tax collection. The large taxes (income tax, companies, VAT and special) have grown during these seven months at rates close to 8%, a rate that was not seen since the times of the housing bubble. This formidable fiscal harvest will lead to the fact that, for the first time in more than a decade, the fiscal revenues budgeted last year are very close to those actually obtained.

The official collection figures published by the Tax Agency up to November make it possible to ensure that in 2018 the record achieved in 2007, during the real estate boom, was exceeded. And on this good picture, the Treasury has cemented the Budgets of 2019 with the highest income ever expected to date. With the favorable behavior of the collection and the new tax measures, with which it expects to scratch around 6,000 million more, the Treasury will set its forecast of tax revenues in a little more than 225,000 million euros, according to calculations made by EL PAÍS.

More income than ever

This increase would be the largest annual increase in revenues budgeted since 2008. With that money, Sanchez will be able to finance the social measures he has announced, the agreement with Podemos and reserve something for the pacts with the Catalan separatists.

Sánchez wants to give a social turn to the 2019 accounts. His speech is based on combating the inequality generated during the crisis and serving those who have been left behind during all these years. His project is to stop the social wounds that the recovery has not yet sutured.

To do this, it will raise pensions by 1.6% and increase the salary of civil servants by about 2.5%. The item will also grow to finance public housing and a great improvement in dependency is expected. Along with these initiatives, the public accounts will include a plan against child poverty and aid for the most needy families. The provision for science, scholarships and education will also be increased. As well as more funds for programs against gender violence and to promote effective equality.

Sánchez predicts a record of revenue in the Budgets to finance the rise in social spending

All these social measures suppose an increase of the expense that will be reflected in the project of Budgets that will approve today the Council of Ministers. In order to finance this social deployment, the Government trusts that the good progress of the economy will maintain the rate of collection. It projects that the recovery of wages and the creation of employment will help stimulate economic activity and this will have an impact on tax revenues, improve income tax, VAT and drag corporate tax. The calculations made by this newspaper put in about 9,000 million the additional revenue contributed by the economic pull.

New taxes: Google rate and financial transactions

But the government wants more income that will allow it to continue reducing the public deficit and pay the new social policies. So the Budgets will include several tax increases. Among them stands out the increase in corporate tax for multinationals that bill more than 20 million euros. They will be obliged to pay a minimum of 15% on the tax base and 5% on the external dividends. Taxpayers who earn more than 140,000 euros will have an increased rate in the IRPF, which will be even higher for those who declare more than 300,000 euros. Most of these measures, both of expenditure and of income, are part of the Budget agreement between the PSOE and Podemos, signed last October.

Sánchez predicts a record of revenue in the Budgets to finance the rise in social spending

The public accounts will also contain a property tax increase for the wealthiest. The Treasury will raise the tax by 1% for the fortunes of more than 10 million. The SICAV, the financial instruments used by the most affluent to impound their assets, and the socimi, companies that manage real estate assets, will have more pressure from the Treasury.

But the government also prepares other new taxes. These can not go in the text of the Budgets but they must be processed as new rules. This is the case of the tax on digital activities, known as Google tax, with which the Executive expects to enter around 1,200 million more. This was included in the legal draft that was approved by the Council of Ministers at the end of November and which has been amended with the contributions gathered in the public consultation. It is the same case as the tax on financial transactions, a new tax that will tax with 0.2% the purchase of shares of large companies. The Treasury expects to obtain about 1,000 million with this new fiscal figure, which will be used entirely to finance pensions, as Montero said a couple of months ago. But the decrees of these two new taxes will finally be approved by the Council of Ministers next Friday.

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