August 1, 2021

Sánchez will pull "decretazo" to raise the taxes that finance his social agenda

Sánchez will pull "decretazo" to raise the taxes that finance his social agenda

Susana AlcelaySusana Alcelay


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The president of Government is not going to throw in the towel. A hypothetical lack of support for the 2019 Budgets is not going to prevent it from carrying out the tax increases and the social agenda that it intends to finance with the new revenue. The «A» scenario that Pedro Sánchez manages is that his allies give their approval to the public accounts for next year, a complicated objective if one takes into account that his reference partner, Podemos, yesterday said that he will not support those accounts if the chief executive does not keep his word and integrates all his requests in the Budget.

Scenario "B" of the president would only apply if his budget did not achieve sufficient support. This scenario is the one that begins to take strength after the demands of the purple formation, many of them impossible to carry out due to the high cost. In this case, Pedro Sánchez would extend the accounts, a mechanism that harshly recriminated Mariano Rajoy who, in the same situation, invited him to call elections. In addition to the extension, the president would approve two royal decrees with the executive guidelines for next year.

The first of the decrees would include the battery of new taxes that would affect the IRPF and Companies, in addition to the creation of new tax figures such as the "google rate". The second decree would pick up the social agenda that could be financed with the new tax hikes and that would allow it to "rebuild the Welfare State".

The two royal decrees should be validated later by the Congress of Deputies, which would force the parliamentary groups to be photographed and have to argue their rejection of social impact measures. It is the Government's intention to equalize maternity leave for women and men, adjust the payment of self-employed contributions to their real income, recover the subsidy for unemployed people over 52 and long-term unemployed or eliminate pharmaceutical copayments for pensioners The strategy of the PSOE in this scenario would be to appeal to the responsibility of the parliamentary groups and the electoral cost that could suppose to reject social measures that can favor a great majority of Spaniards.

Yesterday Podemos again put pressure on the Government in a key week in which the Council of Ministers will approve the public accounts for 2019. The master guidelines will be approved on Thursday and Monday 15 will be sent to Brussels. When the negotiations with the purple formation seemed on track -the same Pablo Iglesias announced it last week- yesterday the situation took a turn of 180 degrees. Pablo Echenique warned the Executive that at this moment we could give a "no" to the accounts for 2019. "If we do not manage to make progress we would be in the no. The reality to Monday is this, "he said.

The divergence between both formations is not, precisely, of little draft. If you want the support of Podemos, the government should give in on many issues. For example, in the Minimum Interprofessional Salary (SMI). The Government intended to raise it to 1,000 euros in 2020, although its partners require it to advance that amount to 2019. The repeal of the labor reform is another point of contention. While the PSOE has set itself the goal of softening it, since Podemos its derogation is demanded.

Pensions in discord

Pensions are also a point of disagreement. PSOE and Podemos agree to adapt the increases to the real CPI but disagree in the revaluation formula. The Government has already committed to revalue them for 2019 and 2020, but its idea is to use other ingredients besides prices (salaries, GDP, etc.). At this point we can only demand to do it with the IPC and shield it by law.

The self-employed return to be object of desire. Podemos has one of its priorities marked as lowering the fees to the self-employed who have less income. This is already one of the agreements that Sanchez and Iglesias have already reached in their meeting in Moncloa, although the numbers have not yet been specified. It was also one of the demands of the PSOE in the opposition, which advocated reforms in the autonomous regime to ensure that those with incomes below the minimum wage did not have to pay contributions and that these quotas were adjusted to the real income of each worker.

But without a doubt it is the fiscal policy where it is more important to reach an agreement for Sanchez taking into account that it will be the extra financing that will be necessary to sustain the social agenda. As ABC has already informed, the draft budget will include an increase in personal income tax (IRPF) to income from work and capital, a clear wink to the purple formation, as well as the increase of companies to large companies that bill more than eight million euros. Both measures will mean a tax increase for more than 100,000 taxpayers and 20,000 companies.

The rise in personal income tax will affect the income from work and capital of more than 140,000 euros. In the income from work, will introduce an additional stretch to make the most progressive increase in which will pass the maximum rate of 48% or 49%. At this point there is still no agreement and the income tranche is being negotiated, according to sources familiar with the process. Now the highest marginal of the tax in the state rate is 45%.

I also know they will create new taxes. The tax on financial transactions with 0.2% as requested by Podemos and that of the technological ones, of 3%, which will affect companies with a turnover of 3 million and totaling 750 million of global business. The "Google rate" will affect all types of digital economy firms such as Amazon, Uber and Airbnb. It will tax online ad sales, the intermediation of digital platforms and the sales of platforms that use data generated by users.

It will also begin to tax more diesel to raise its tax rate of 307 euros per thousand liters to 345 euros, a rise that the Treasury calculates will be 3.3 euros per month.


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