November 25, 2020

The IMF asks the Government to postpone the increases to diesel and VAT so as not to harm low incomes


MADRID

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The International Monetary Fund (IMF) welcomes measures such as increasing the VAT collection or environmental taxes but he does not believe that now is the best time since it would harm low incomes with the wound of the crisis still open. This is reflected in his latest report on Spain, in which he launches a battery of recommendations to the Government of PSOE and Podemos, which has just presented a project of General State Budgets that includes an increase in diesel taxation and VAT increases. sugary drinks by 2021.

“Measures that have a disproportionate effect on low incomes to raise VAT collection or raise environmental taxes, should wait until the recovery is firm and is accompanied by spending focused on protecting the most vulnerable,” says the institution led by Kristalina Georgieva.

Precisely, the IMF made its last visit to our country to exchange information with the authorities on September 29, when PSOE and Podemos were still negotiating a draft budget with measures on the table such as the increase in VAT for private Health and Education, a tax increase that was not ruled out in the budget plan and that, finally, was left out of the Budget project that did include the increase in diesel and the increase in VAT on sugary drinks from 10% to 21%.

In its general recommendations, curiously, the IMF does welcome these kinds of measures, but this is not the time because of the crisis. In his opinion, it will be necessary to start approving adjustments with a view to rebuilding the deteriorating situation of the public coffers as of 2022. Other measures, such as the increase in personal income tax on high incomes, are well received by the body for 2021

Throughout a detailed 94 page report, the institution also criticizes the rise for 2021 in the payrolls of civil servants and pensioners of 0.9%, which will mean an expense of more than 3,000 million euros next year. “Commitments to permanently increase certain expenses, for example, through expenses in salaries or pensions, should be avoided given the high structural fiscal deficit and the long-term pressures on spending in the older population”, he concludes.

The IMF maintains its forecasts that the economy will fall by 12.8% this year and rebound by 7.2% next year and 4.5% in 2022 and assumes that the public deficit and debt will skyrocket. The agency foresees, yes, that European funds will not have the strong impact that the Government does take into account, which estimates a growth of 9.8% next year, 1.6 points more than the IMF, which also includes this effect.

Salary supplement

Given this limited fiscal margin against which the institution insists that it is time to spend to help the activity – for example, recommends extending ERTE beyond January 31-, a good part of the IMF’s recommendations point to the labor market. The IMF recommends approving the single contract, with increasing severance payments, in addition to the Austrian backpack – a kind of piggy bank in which the worker keeps company contributions that can be taken with him if he changes company and that he can use in his retirement and dismissal.

Because the crisis, points out the IMF, will especially harm temporary workers, which is why it calls for measures to reduce the eventuality in Spain – the largest in the EU – that hurts young people greatly. In this sense, although it recommends ensuring the coordination of Minimum Vital Income with regional income, he proposes to add another measure: a salary supplement that helps employees with low wages, similar to the measure that Ciudadanos has been proposing for years.

Labor reform reduced inequality

Along with this, in a separate document, the institution carries out an evaluation of the 2012 labor reform and the 2017 minimum wage increase. The Fund concludes that the reform helped to reduce inequality thanks to job creation which contributed to promote, in addition to significantly reducing the risk of poverty, although it increased the probability of workers at risk of being in this situation and of having a part-time job. For this reason, the IMF’s assessment of the measure is positive compared to the situation that Spain would have experienced had it not approved this reform.

Negative impact on the rise in the SMI

It also assesses the impact of the rise in Minimum Interprofessional Salary (SMI) of 8% in 2017, under the Government of Mariano Rajoy, since it has detailed and ungraded data that allow it to make a profiling of who was harmed by this rise. According to the agency, the increase increased the probability of losing a job, especially in workers who were earning it and who were over 37 years old, with a seniority of between nine months and six years, in addition to young people from communities with higher wages. low as the Canary Islands or Extremadura.

“The empirical findings show that minimum wage earners over 37 years of age and with at least nine months but less than six years of service were 17 percentage points more likely to lose their jobs due to the increase in the minimum wage than workers who they earn a little more than the minimum wage that they were not affected ”, he collects. For those under 38 years of age in communities with low average wages, “the probability of losing their job was almost 16 percentage points higher than for workers in other regions.”

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