Wed. Apr 24th, 2019

The IMF claims Spain a fiscal adjustment and clean up its pension system

The IMF claims Spain a fiscal adjustment and clean up its pension system

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Fiscal duties wait after the elections and the International Monetary Fund (IMF) has called on Spain to get down to work in the cleaning up of its public accounts. This is how the Fiscal Monitor of the organization writes that "economies with high debt should seek a gradual fiscal adjustment (...) especially in view of the fact that fiscal balances remain below the long-term debt, unless there is an important deceleration ", a recommendation addressed to Spain but also to Canada, France, Japan, UK Y U.S to clean up your public accounts before a serious economic slowdown arrives.

In his new projections , the IMF believes that Spain will be unable to lower the deficit in the coming years beyond 2.3% of GDP which will close this year compared to 2.6% last year. Since then, the institution draws an ascending path of red numbers in the Spanish administrations that are climbing year to year to 2.8% in 2024.

This limited fiscal consolidation fully affects the reduction of public debt, which will only be reduced, according to the IMF, due to growth, since in its report the structural deficit is not reduced. Therefore, the Fund projects forecasts of public debt that slowly decreases to 92% of GDP in 2024.

Precisely, this heavy financial burden is one of the greatest risks for the national economy, since the IMF estimates that every year Spain must refinance about 200,000 million euros, 16% of GDP, which is why she wants to reduce her liability. "With the high debt burdens and the tightening of financial conditions, it is expected that interest payments as a percentage of GDP increase in the medium term for some advanced economies (for example, Canada, Italy, Spain and the United States), the IMF outlines. Spain will have to refinance 16.7% of GDP this year and 16.5% in 2020 and 2021.

More measures to compensate linking IPC and pensions

The elephant in the room of the public deficit is the pension system, the only aspect for which the institution directed by Christine Lagarde reserves a unique recommendation for Spain, in which it shoots in the target of the linking of benefits to the CPI approved by the Government.

"Protecting the financial viability of pension systems requires a comprehensive set of measures, including policies to compensate for Implications of the recent relaxation in the indexation of pensions in Spain», The IMF condemns, asking for more measures of lower spending or higher income to clean up a Social Security whose hole in 2018 was 17,000 million euros.

Criticisms to the Google rate of Sánchez

Another tug of the ears of the organism is the initiative of the Government of Pedro Sanchez to approve a "Google fee" on its own, without waiting for it to be an initiative of several countries after the European Union has delayed this initiative until, at less, 2020 and the OECD will criticize the Executive for wanting to approve it on their own.

«The taxation of multinationals, including highly digitized ones, must be resolved through a multilateral approach. Some countries (Benin, France, India, Italy, Spain, Tanzania, Uganda, United Kingdom, Zambia) plan or have taken measures to tax technology companies and their users. The adoption of measures in an uncoordinated way with the objective of taxing specific companies or sectors can lead to significant distortions such as double taxation of cross-border activities, "criticizes the IMF.

Tax increase to large companies

This recommendation to be shared among the countries also splashes Corporate Tax, which he regrets "a fiscal competition that can lead to global inefficiencies". "Multilateral cooperation would provide a more efficient and effective approach to taxing the benefits of multinationals," he claims. Precisely, the Executive planned to raise the tax to companies that invoiced more than twenty million euros with a minimum rate in the taxable base of 15% -of 18% for banks and oil companies- and limit the exemption of dividends from abroad to 95% and not 100% like now.


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