May 11, 2021

The entanglements of Sánchez's accounts

The entanglements of Sánchez's accounts


If the Budgets are usually considered as the most detailed route agenda that a Government can offer, in recent years they have become a square of the accounting circle that tries to satisfy the close surveillance of Brussels with the political requests multiplied by the parliamentary fragmentation and the growing need for partners. The accounts of 2019 presented by the Executive of Sanchez draw on the one hand a growth that loses muscle, yes, but mainly by adjusting deficit -And not so much because of the worse external behavior, in spite of the alarms of the organisms- and social and political winks based on some collection forecasts that the Fiscal Authority, the Bank of Spain and Brussels have questioned. A cocktail that the paper endures, but that arouses suspicion.

13 months of VAT collection

A large part of the deficit reduction from 2.7% of GDP to 1.3% for next year is based on an accounting anomaly: the 2019 Budgets cover a collection of 13 months of VAT, that is, more than 5,000 million euros extra. What is this about? The team of Cristóbal Montoro approved the Immediate Information System (SII) in VAT in 2017, that provoked that, when advancing the returns and postponing the declaration of the tax to the 30th day of the month instead of the previous 20, the Budgets collected the income in the tax until November, since December did not enter. The Government wants to anticipate the declaration back to the 20th of each month to be able to enter one more month of collection, on December of 2019. An operation that causes the accounts to collect thirteen months of income, a hypothesis that raises doubts since the income of December 2018 – which would also enter the 2019 accounts – can already be included in the national accounts for 2018, according to well-known sources. This modification allows to wipe a good part of the distance between the 1.8% deficit goal desired by the Executive and the final 1.3%.

The deficit goes down, the debt not so much

When reviewing the fiscal forecasts of the Executive, it is striking that the deficit compared to the budget plan that the Government sent to Brussels in October goes from 1.8% to 1.3% of GDP, but the debt does not fall with the presumed intensity before this adjustment renewed. Compared to its numbers a few months ago, the effect is nil: although it reduces its estimate of a passive one to 95.4%, this is because it also does it in 2018, going from 97% to 96.9%.

No downward revision

Really the Government raises his forecast of growth to 2.4% in spite of the alerts of the international organisms, since until now it counted its objective of deficit of 1,8%, and not of the 1,3% that finally it governs when not having could approve his goal. The higher the fiscal adjustment, the lower activity of two tenths less, to 2.2%. The worsening of the international context in the last few months, therefore, does not take its toll when collecting the effect of the depreciation of oil and the rise of SMI, public salaries and pensions, according to Calviño. All this despite the fact that the ECB has stopped its purchases and foresees increases in rates and the Eurozone has reduced its growth.

6,000 million fiscal increase without effect on GDP

The Government presumes the effect on the activity of these measures, due to the higher household income, but at the same time points out that the 5,654 million euros of tax increases will have a "neutral" impact on GDP, despite the fact that according to the Government it will mean a structural adjustment -that is, beyond the cycle- of four tenths of GDP: 4,800 million euros. Experts consulted reject that it is possible that a structural adjustment of this caliber does not have a negative impact on activity, even adding up the spending increase and with low fiscal multipliers. In addition, the 1.2 billion "Google rate" foreseen – above what Brussels estimated to apply in limited terms -, the 850 "Tobin rate" -more than what Italy or France collects in GDP revenues for a year. similar taxes- or 339 for the increase in Heritage -that the regions will perceive- throw gaps. And, in short, with the added difficulty that tax revenues grow as estimated by the Government, three times more than nominal GDP, 11.9% compared to 3.8% that will advance the second.

Falsified fulfillment of the deficit

Although spending on pensions will set a record, with 153,864 million, Social Security must reduce its imbalance by 7,200 million euros, from 1.5% of GDP to 0.9%. While it will be offset by the surplus of local corporations, this will be lower next year. And if the State will collaborate with transfers and cover some of the expenses such as the increase in non-contributory pensions, the Central Administration must go from a hole of 1.4% of GDP to 0.3%: 13.2 billion adjustment. In short, the Administration as a whole faces a cut of about 17,000 million to meet a deficit that goes from 2.7% to 1.3% of GDP with some increases in spending -by increases to pensioners, officials and minimum wage- which started on January 1 and tax increases that can only start in the best of scenarios and in a few cases starting in the spring, when the accounts can come into force.


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