Spain plans to hike taxes to soften coronavirus crisis impact

Spanish PM Pedro Sanchez said on Thursday that fiscal reform was needed if Spain was to deal with the economic crisis triggered by the coronavirus pandemic. He hinted that tax hikes, notably for larger companies, seems inevitable. The PM also pledged €9bn for Spain's regions to reinforce the public health system, which was stretched to the maximum by the epidemic.

His remarks came as European nations were locked in talks over a 750-billion-euro rescue fund, that would predominantly benefit southern nations like Spain and Italy, two of the worst-hit countries in Europe. "We will have to reduce public debt, we will also have to lower the public deficit and for that, we will have to increase the state's revenue capacity," Sanchez told LaSexta news channel.

According to the PM, Spain's low tax income made it "inevitable that we will have to carry out fiscal reform" given that government revenues are so much lower than the European average, "seven percentage points lower than GDP". "We want to have a robust welfare state and we're going to do that with fiscal justice," which will mean "raising taxes on big companies and not on SMEs," he said, without giving further details. "Big companies have effective tax rates that are under 10% while smaller and medium-sized companies pay a lot more," he said.

Asked about an eventual hike in VAT, which has been sought by the Bank of Spain, Sánchez limited himself to saying "the most important thing is fiscal justice". Regarding income tax, Sánchez said his election campaign laid out the possibility "that the higher tax brackets could be expanded". He also said he would seek to "accelerate" the imposition of environmental taxes.

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