The Institute of Economic Studies (IEE), a think tank linked to the employers ‘ association CEOE proposes to reduce direct taxes and raise some of the figures hints that Spain will be able to shorten the wealth gap that still remains with the whole of the European Union. Although this is the trend followed by the more developed countries, the academy considers that indirect taxes are less progressive than direct.
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The president of this center of studies of the liberal trend, José Luis Feito, offered to cut the corporate tax, the taxation of capital and savings (wealth tax, inheritance and donations). We also advocate a reduction of social security contributions. All of this, he says, will stimulate economic growth and grow faster than our community partners. Not to loosen the public accounts and maintain the State of well-being, Feito raises up the VAT, the tolls of the highways and increase the copayments.
“the report says that the lowering of the corporate tax is good for the workers. The fall of the capital income, social security contributions and the VAT hike is good for workers and especially for the most humble. As this is counterproductive and is controversial it has to be explained,” says Feito.
What taxes need to go up and which go down
In a report titled how Should raise or lower taxes in Spain?, the president of the IEE explains that often from positions on the left are advocating for a tax increase under the pretext that Spain collects below the EU average. “But the average of the Sultanbet EU is richer than us. It has a level of income 8% higher than us.” And exemplifies: “it Is as if we think that if the rich smoke cigars and have a hat, the only thing I need to do to be rich is smoking cigars and buy me a hat”.
Feito considered that “it would be nonsense to try to converge with the levels of taxation of the richest countries in the us before getting to convergence with per capita income”.
The EEI argues that Spain should design policies to address the three major economic imbalances: the gap of income per capita relative to the EU, the high rate of unemployment and high external debt. Also would have to add to the bulging public deficit that still keep the Public Administrations and the heavy public debt, which stands at almost 100% of the GDP.
Grow more than the EU
To foster the growth of our productivity and GDP per capita, bringing them closer to the levels of the richer countries, it is necessary to maintain a high rimo investment in fixed capital, has said Feito.
And your prescription to accelerate the pace of growth is by reducing the corporate income tax and lower the VAT. In economic theory it is considered that the consumption tax is one of the taxes less progressive, that there are. Although there are some studies (Desiderio Romero, Funcas) which argues that the VAT has a component progressive (for the composition of the basket of the purchase of the different levels of income) it is certain that this tribute is regarded as regressive: those who have more do not pay more because the types are the same for all incomes.
“it Is usual to criticize this type of policy tax for its regressivity,” says Feito, who continues: “Presumably displaces a greater proportion of the tax burden towards lower income groups. This is a static view and wrong” sentence. Asked who would be the winners and losers with the tax proposal that consists in lowering the corporate income tax and of capital (taxing savings, dividends, equity…), Feito no doubt ensure that would be the workers lower paid and less trained. His argument is that as companies would have more surpluses they could better distribute and increase wages with more force. A thesis that is widely discussed by other scholarly sources.
