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Tax plan gets deflating business response

20 December 2004

MADRID – The government’s decision to discount the effects of inflation on income tax next year has come under criticism from big business less than two weeks before it is due to come into force on 1 January.

A document, released at the weekend by Spain’s largest business confederation, the CEOE, claims that the change will be of only “limited benefit” to workers because it is based on the 2004 target inflation rate of 2 percent and not the real inflation rate, which is likely to be around 3.5 percent. It also fails to take into account accumulated inflation from previous years, the Spanish daily El Pais reported.

The government argues that the measure, which will prevent some workers moving into higher tax brackets due to the effects of inflation, will save taxpayers an overall total of EUR 175 million next year.

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Subject: Spanish news