Spain: A Decade Of Fiscal Folly

Fiscal Policy.
Fiscal Policy.

Fernando González Urbaneja | Both the cu­rrent and the pre­vious go­vern­ment (Rajoy and Sánchez or Montoro and Montero) have earned a page in Spanish fiscal his­tory with the qua­li­fi­ca­tion of a con­fu­sing, witty and im­pro­vi­sa­tional pe­riod. Both go­vern­ments com­mis­sioned re­ports from groups of ex­perts for a major tax re­form. And both re­ports, of un­ques­tio­nable tech­nical qua­lity and with in­ter­es­ting pro­po­sals, were bu­ried in the drawer of do­cu­ments to be for­got­ten.

Mere propaganda. Both governments have been prodigal in retreading, reforming, complicating, tangling … the tax system, which for more than a decade has been in need of reform and updating due to the expiry of the model, due to exhaustion.

But none of the ministers (and both presidents) have been able to understand the problem and propose a respectable and responsible reform. In Montoro’s case, he signed a hundred and a half laws of varying rank that modified the system, generally to increase taxation and confuse taxpayers. Several of the rules with the greatest impact were later found against the provisions approved by Parliament by the high European and Spanish courts, with disastrous consequences for the tax authorities and for taxpayers, although not for those responsible for the errors.

The case of the current government is following a similar path. Many rules, many changes, many ideas… with poor results. The fate of these regulations, when they pass through the judicial sieve, is highly likely, in the opinion of seasoned tax experts, to be shipwrecked with unfavourable consequences for everyone, except for the perpetrators of the outrages. Now the government, in response to the application of a zero rate for wealth tax in Andalusia, warns that it is preparing, without further details, a tax on the rich. Taxing the rich (the 1% of taxpayers) has a good press, it sounds good to the common man, but then it usually comes to little or nothing, more intention than results.

The tax on the rich is a truism, a simplicity that begins with the indeterminacy of what it means to be rich; rich by wealth? rich by income? rich by inheritance? And, above all, the taxation system, the definition of the tax base and the applicable rates. In these details, any opinion is just talk for the sake of talk.

There is a lot of doctrine and literature on taxation, many well-founded reports and a great deal of proven experience. Correct taxation (regardless of the volume of tax revenue, low or high rates) requires few rules, very clear, that last, that are complied with, that collect what is expected and that are general in nature. What we have now is: many rules, which are short-lived, imprecise and casuistic, which are not complied with and which collect less than expected. In short, a fiscal mess. Montoro and Montero are writing the least brilliant pages in the fiscal history of the last fifty years.

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