The Airef affects the lack of transparency of the Spanish tax system and asks to review the tax strategy

Gonzalo D. VelardeCONTINUEMadrid Updated: 05/27/2022 17:37h
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The tax reform that the Government is preparing for 2023 and with which it is intended to give a new impetus to tax revenues must, however, be carried out with pinpoint precision in the modifications that are introduced on the
different tax figures
. This is what the changing economic scenario demands and the change in the paradigm after the impact of the pandemic and the war in Ukraine that forces us to reconfigure the rules for the coming years.

Precisely, after knowing the Executive that the tax reform will not delay beyond 2023, as recently sent to Brussels in the National Reform Plan, the Independent Authority for Fiscal Responsibility (Airef) warns the Government that the changing scenario requires a deep revision of the fiscal strategy and demand that it be adjusted to a new framework of economic needs.

During the third 'EY Insights Economics' meeting, the president of Airef, Crsitina Herrero, assured that the medium-term fiscal strategy that is needed to guarantee the sustainability of public finances must be anchored to a new national fiscal framework capable of adapting to the needs and challenges of the country. In her opinion,
the reform of the national fiscal framework
it is necessary and there is room to improve procedures, coordination between Public Administrations and to define the rules of competence and financing at all levels.

This fiscal strategy, Herrero assures, “must be anchored to a new national fiscal framework capable of adapting to the needs and challenges of the country. The current regulations suffer from the deficiencies inherited from the European framework and those derived from the decentralization model«. At this point, the Tax Authority warns that the Spanish system is complex and unpredictable, with a lack of medium-term vision and highly oriented towards the supervision of Territorial Administrations.

In addition, Airef emphasizes that “it has rules that are not very enforceable, it lacks transparency and coordination and requires regulatory development that clarifies concepts and methodologies. There is room to improve procedures, coordination and to define the rules of competition and financing at all levels.

Airef also warns that
public debt will start an upward path
from the year 2025 if the structural deficit of 4% is not reduced. Although it does conclude that the Government Stability Program proposes feasible scenarios, both in the macroeconomic and fiscal aspects, although "there are numerous vulnerabilities and it is still not the medium-term fiscal strategy that the Institution has recommended on numerous occasions," according to Herrero.

For his part, Juan Pablo Riesgo, partner in charge of EY Insights, highlighted during the meeting the importance of addressing key debates such as taxation, due to its impact on the economic and social development of Spain. “The vision of independent experts helps us rigorously analyze what is happening and how to move forward, reflecting and providing useful and realistic solutions to address the important economic and social challenges we face. The complexity of the environment we are going through means that this is the time to strengthen the collaboration of all those who have something to contribute, creating spaces for neutral dialogue like this one », he commented.

European rules

Not in vain, the accumulation of 'shocks' that has generated an unstable and uncertain context, with a differential impact in Spain compared to the rest of the euro zone due to the greater weight of the hotel industry and recreational activities in GDP, and the greater degree of translation of the increases in wholesale market energy prices draw a new budgetary horizon.

Airef recalls that the institutional framework in which economic activity takes place "has been deliberately altered, with an unknown degree of flexibility and intervention that alters historical relationships." Specifically, fiscal rules remain suspended and extraordinary measures and policies have been approved at European and national level to deal with the pandemic and the war in Ukraine.

However, "fiscal supervision has not been suspended and is even more necessary than ever." Quantitative rules have been replaced by guidelines and the Independent Tax Authorities ensure their consistency. However, in 2023, these guidelines already incorporate certain quantitative elements. The European Commission has already recommended that Spain carry out a prudent fiscal policy, with growth in current spending with national financing below potential GDP.

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