VAT Rebellion in Spain: “Highly Unusual”
March 16th, 2010
The Minister of Industry, Tourism and Trade, Miguel Sebastian, has called the campaign against the proposed VAT hike by the president of the Community of Madrid, Esperanza Aguirre, “highly unusual” and asked her to “reconsider”.
The minister reminded the Madrid president that the increase in VAT is a decision that cannot be rejected by “the government itself, but the agreement of the Spanish Parliament”, which gave its approval to the increase in VAT in the first place. “It is especially serious that the president of a community would try to raise a rebellion against the Spanish Parliament,” he said.
Sebastian raised doubts that the campaign against the VAT hike, undertaken by Aguirre, will work in the end because “the informed public know that taxes rise most in areas governed by Aguirre’s Popular Party.”
According to the Minister of Industry, the increase in VAT, which will be launched from July, is “very sensible and moderate” compared to all of the taxes which the government has cut in recent times. In fact, he stressed that the socialist government is “the democratic government that has lowered taxes the most, with a total of about 20,000 billion in tax cuts. But the government needs resources now because it is necessary to reduce the country’s deficit,” explained Sebastian when justifying the rise in tax.
The minister insisted that Spain has one of the lowest VAT rates in Europe and, even after the rise, will still remain so, while “almost 50% of VAT receipts will not be liable to the tax hike” because they fall under a reduced rate. Furthermore, as already announced a few days ago by Secretary of State for Trade, Silvia Iranzo, only about a quarter of the VAT rise, about 0.5%, will be translated to actual end consumer price changes.
When questioned about statements from the European Competition Commissioner, Joaquin Almunia, who believes that the government’s macroeconomic forecasts from 2011 “are guilty of some optimism,” Sebastian said that “now is no time to argue about what will happen in 2011!” The Industry Minister continued that although “Almunia’s opinion is always interesting,” the macroeconomic forecasts are not among his duties anyway.
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