Spain PM says tax hikes will be temporary

30th August 2009, Comments 0 comments

The Spanish government will raise taxes to help plug a gaping public deficit caused by the economic downturn but any increases will be short-lived, Prime Minister Jose Luis Rodriguez Zapatero said.

Madrid - The Spanish government will raise taxes to help plug a gaping public deficit caused by the economic downturn but any increases will be short-lived, Prime Minister Jose Luis Rodriguez Zapatero said.

"There will be some adjustments, some revisions, some increases and some decreases, but in all cases the changes will be limited and temporary," he told a news conference following a weekly cabinet meeting.

Spain's cash-strapped government is expected to table its budget for 2010 next month and last week Public Works Minister Jose Blanco suggested the country was poised to follow Britain's example and increase taxes on the rich.

"I believe in helping those who most need it, and if in order to help the needy those who can most afford it have to tighten their belts in times of hardship, then we must say so clearly to the public," he said in a radio interview.

Spain's public deficit has widened dramatically as the government boosts spending on public works and other measures intended to cushion the effects of the country's worst recession in decades which has led to sagging tax revenues.

The government forecasts the public deficit will equal 8.1 percent of gross domestic product this year after posting a surplus of 2.2 percent in 2007.

The Spanish economy, the fifth-largest in Europe, entered into recession during the second half of last year as the global credit crunch worsened a correction already underway in its property sector.

The economic contraction has caused the unemployment rate to balloon to nearly 18 percent, the highest rate in the European Union, leading to a sharp rise in spending on jobless benefits.

Earlier this month the government introduced a new special monthly subsidy of 420 euros (600 dollars) for people whose unemployment benefits have run out.

Raising taxes would be a reversal in policy for Zapatero's Socialists, who have cut taxes and even abolished the wealth tax last year.

The British government has decided to increase the top rate of personal income tax from 40 percent to 50 percent next year.

AFP / Expatica


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