The OECD asks Spain for more VAT and to reduce deductions in personal income tax when the crisis passes




The Organization for Economic Cooperation and Development (OECD) has drawn attention to Spain for its high inequality, high unemployment and low productivity. For this reason, in its new report “Going for growth 2021” it asks for a detailed menu of reforms, with measures such as raise VAT on products with reduced rates, remove exemptions in personal income tax, more taxes on fuels to lower carbon dioxide emissions, in addition to fighting against temporality and simplifying the number of contracts.

The first two imbalances highlighted by the OECD in our country, prior to the pandemic, are that the GDP per capita was 27% lower than countries above the OECD average, while productivity per hour worked is 19% lower. In this way, in its file on Spain, the institution emphasizes that before the pandemic, Spain had an inequality 10% higher than advanced economies, with a Gini index of 33 points in 2018b compared to the median of 30.3 in the second. «The poorest 20% of households earn 6.7% of total income», Alerts the report.

“In the medium term, a more effective tax system could reduce inequalities, lower pollution and emissions and provide financing to reform the labor market, education and innovation,” he explains. Of course, he warns that «Any tax hike should be implemented only once the recovery is firmly on track, and should be accompanied by targeted and temporary compensatory measures for the most vulnerable families.

Among its fiscal recommendations, a few days after the establishment of the group of experts for the future reform of the system, are «increase taxation of fuels to better reflect carbon dioxide emissions, in addition to a greater redistribution to the poorest households ”. They also ask «Limit the use of reduced VAT rates and exemptions in the medium term“, in addition to “reduce exemptions in income taxes.

Lower number of contracts

The labor market also centers part of the duties of the OECD. “Temporary workers with little training have been disproportionately affected by the Covid-19 crisis and tend to be more concentrated in the worst hit sectors (tourism, hospitality) and in certain parts of the country,” he details. In view of this, he recommends reform active employment policies and to deploy recycling programs for workers with less training or older in areas such as Information and Communication Technologies (ICT). Furthermore, it recommends continuing efforts to “fight the abuse of temporary contracts” and “simplify the menu of contracts”.

Encourage companies to gain size

Along with this, it draws attention to the obstacles that continue to prevent the gain of business size in our country, for which it asks to eliminate them, as well as the barriers to implement the Single Market Law and improve the functioning of professional services. On the educational side, Spain is the leader in school dropouts in Europe and has a percentage of graduates from secondary education (74.2%) lower than that of the EU (79.7%) and OECD (80.4%), thus demanding more individualized support for students who are more likely to drop out of school.

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