Spain's Catalonia to raise taxes on rich

1st June 2010, Comments 0 comments

The regional government of Spain's wealthy region of Catalonia said Tuesday it would raise the income tax rate applied to top earners as part of efforts to slash the public deficit.

The tax rate for people earning more than 175,000 euros (215,000 dollars) per year will rise to 25.5 percent from 21.5 percent while the rate for those earning over 120,000 euros will increase to 23.5 percent from 21.5 percent.

The measure will come into force next year and it will affect about 20,000 taxpayers, or about 0.5 percent of all income tax filers in the northeastern region, Catalonia regional left-wing coalition government said in a statement.

Spain is highly decentralized and its 17 autonomous communities, which account for about one-third of general government expenditures, have extensive powers of taxation as well as in other area such as education and policing.

Income tax paid in Catalonia, which is home to some 7.5 million of Spain's total population of 47 million, is split evenly between the regional and the central governments.

The Catalan regional government adopted Tuesday several other measures aimed at reducing its public deficit this year to 4.7 billion euros, or the equivalent of 2.7 percent of output from the 6.37 billion euros or 3.25 percent originally forecast.

International ratings agency Standard and Poor's warned Spain last month that its powerful regional governments face worsening deficits.

It predicted Spain's regional debt burden could surpass 110 percent of consolidated operating revenues in 2012, up from just 40 percent in 2007.

The central government of socialist Prime Minister Jose Luis Rodriguez Zapatero has said it will shortly announce a new tax on richer people as part of tough austerity cuts that are proving hugely unpopular.

Last month, parliament narrowly approved a new 15-billion-euro austerity package which includes a five-percent pay cut for civil servants and a freeze on pensions.

Those cuts are on top of a 50-billion-euro package announced in January as Madrid tries to put the country's public finances in order and avoid following Greece into a debt crisis.

Zapatero's government is trying to bring the overall public sector budget shortfall down to the eurozone limit of three percent of gross domestic product by 2013 from 11.2 percent last year.

© 2010 AFP

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