4 Pages Posted: 1 Mar 2013
Date Written: 2012
Last year’s election of Spain’s conservative People’s Party opened up an opportunity to implement much needed fiscal and structural reforms. However, merely a week following the December 21, 2011, inauguration of Prime Minister Mariano Rajoy, the government announced a significant tax hike that will have pernicious effects on the Spanish economy. The main reason for the tax hikes, according to Spain’s new leadership, was that the government would miss its budget deficit target for 2011. While the previous Socialist Party government had promised the figure would be 6 percent of GDP, the revised data showed a budget deficit of 8 percent, a difference of approximately 20 billion euros ($26.3 billion). That change makes it more challenging for the government to fulfill its deficit pledge of 4.4 percent by the end of 2012. However, the measure demonstrates nothing more than a lack of political will to cut excessive and unsustainable public spending.
Keywords: Spanish Tax Rates, Spanish Economy, European Union, Socialism and Spain, Spanish Fiscal Reform, Spanish Budget, Spanish Expenditures, Spanish Fiscal Policy
JEL Classification: H20, H21
Suggested Citation: Suggested Citation
Rallo, Juan Ramón and Oro, Angel Martin and Marti, Adria Perez, Spain Becomes One of Europe's Highest Taxed Countries (2012). Cato Institute Economic Development Bulletin No. 15, February 29, 2012. Available at SSRN: https://ssrn.com/abstract=2226462