Reality deviates drastically from initial forecasts made by Spanish Tax Office
Poor collection of both corporation tax and personal income tax overthrow the forecasts made by the Tax Office in the State Budget for 2016. Reality deviates drastically from initial forecasts made by Spanish Tax Office:
The Tax Agency was too optimistic in the preparation of the State Budget, published shortly before the general elections of 20 December, making an estimate of income tax and corporate tax revenues which have proved unrealistic.
The actual data of tax collection which has been known throughout these months has finally awakened the Tax Office. In this sense, and with respect to personal income tax, the revenue achieved reached 31,140 million euros, 4.7% less than planned; that is, 1,550 million below the estimate.
This decrease is due to the tax reform approved by the government which lowered tax rates although, in this regard, the Spanish Treasury hopes that from August onwards the results of personal income tax collection will improve.
As for corporate tax, forecasts have totally failed. Of 24,868 million of expected revenues, only 221 million have been achieved. There are two causes: the removal of payments by instalments, and of the minimum payment of 12% on the financial results of companies.
As a result, the incumbent government has had to commit to Brussels to increase corporate tax between 20% to 25% in order to raise 6,000 million euros more, and in this way achieve the target set regarding public deficit, although this measure cannot be made effective until there is a newly formed government.
On a positive note, revenue from VAT, which has been of 31,313 million euros, has been 4.4% more than expected.
The failure in the forecasts made by the Tax Agency has revealed that Spain cannot meet the public deficit target of 3.6% of GDP agreed with the European Union, and in fact current estimates indicate it could be around 4.1% or 4.7%. Bad times for dreaming.
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Del Canto Chambers’ Editorial Board