Spain has been devastated by round after round of tax hikes. Another one is on the way. Via Google-translate, please consider this non-modified translation of government shuffles new tax increases to reduce the deficit

Never two without three. The brutal tax increases approved by the Government of Mariano Rajoy in late 2011, increasing the income tax and the tax on savings , among other figures, and the recent increase launched last July, with the increase in VAT , Taxes -special rate you could add soon a new tax hike to reach the deficit target of 6.3% of GDP set for this exercise. This, with an eye on a country’s total bailout, whose application could occur next September.

Before formalizing the request for assistance, the government wants to make sure you are ready to meet the deficit target, and for that “is likely to take much more drastic measures they currently have,” reveals a member of the Government, on Monday reported the newspaper El Pais. Among these, it weighs a new tax increases and a freeze on state pensions.

“The evolution of expenditure, with the cuts we have made, we have more or less clear, we do not know is how the revenues are going to go,” admitted to the Government. In the first half of the year things did not go well: overall, tax revenues fell by 3.5% annual rate, far from expected for 2012 (increase of 4.3% per year).

The Ministry of Finance will report to the Executive on the development of tax collection during the summer months, and “if revenues continue to fall, probably will have to return to raise taxes and cut spending again, although here and can hardly play more “, added the sources. Specifically, in its editorial, the paper notes that Prisa Economy Minister Luis de Guindos, thinks “there is no room for further cuts in spending,” which means that additional adjustments would have to come from the side of income.

Thus, the government may choose to remove the shelter deduction retroactively (about 6,000 million euros) or relief for contributions to private pension plans (2,000 million); impose verd penny and not only gas, but also to fuels; Excise reraise (alcohol, snuff …) or implement new environmental taxes, and more. It is not ruled out anything.

Spain’s economy minister says “there is no room for further cuts in spending”, a position I believe is preposterous. However, my position does not matter.

What does matter is Spain is in an economic downward spiral and tax hikes will make matters worse. Sadly that is the primary option on the table. 

Mike “Mish” Shedlock
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