Insights

The victorious People’s Party (conservative party) that took over Spain’s government December 22 has announced that the county’s deficit is expected to be 8% of GDP this year, significantly higher than the 6% previously reported. The new government stated that the previous government failed to accurately publicize the extent of the fiscal trouble.

New Prime Minister Mariano Rajoy has stated that the party is absolutely committed to the deficit-reduction promise Spain has made to the European Union. In response to this commitment, the government has announced extensive tax measures for the coming year. The tax package includes income tax increases across the board, ranging from increases of 0.75% to as much as 7% for high-income (EUR300,000) earners. Under the proposals, tax rates on savings income and property above certain values will also be increased. Savings income rates are proposed to range from 2% - 6%.

The EU, via a statement from the European Commissioner for Economic and Monetary Affairs, welcomed the tax measures. Commissioner Olli Rehn stated that the measures, along with other reforms, will reinforce the credibility of the Spanish economy.

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This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.

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