NewsAyuso Sends Sánchez A Tax Reduction Manual Endorsed By 30 Experts

Ayuso Sends Sánchez A Tax Reduction Manual Endorsed By 30 Experts

The Government of Isabel Díaz Ayuso sent this Wednesday to the Ministry of Finance a 237-page document, a kind of manual, with arguments that support empirically and legally, why the Community of Madrid opts for a low-tax policy, as opposed to harmonization that the Government of Pedro Sánchez postulates, once the Committee of Experts selected by the Executive makes this decision.

In response to the demand for contributions, which the Committee of Experts has requested from the Autonomous Communities to date, the Community of Madrid presented its White Book on Tax Reform , a document for which it has used studies, reports and reflections of at least 30 experts on tax policies, tax reform , modernization of wealth taxation or the regulatory capacity of the Madrid administration on ceded taxes such as Heritage, Successions and Donations.

Among the experts are César García Novoa, Francisco Cabrillo, Santiago Álvarez García, Lorenzo Bernaldo de Quirós, Ignacio Ruiz Jarabo, the Institute for Economic Studies, CEOE, ATA, CEIM, Círculo de Empresarios, Instituto de Estudios Burstiles, Fundación Civismo or the Ostrom Institute.

At a press conference, Javier Fernández Lasquetty, Minister of Finance and Economy, stressed that with these recipes -where the tax burden does not reduce the collection capacity-, it turns out that Madrid is the most supportive region, and the one that contributes the most to the cash register common . Thus, delivery from Madrid stands at 68%, followed by Catalonia with 25%. The counselor recalled that Madrid’s contribution has remained above 70%, even in the worst years of the crisis (2011-2015).

Banishing the effect of capital status, tax dumping, academic studies and business and economic institutes abound in this text in the distortions that cause certain taxes to be raised, and on the contrary, in how the reduction, for example, of 10 marginal points on personal income tax , has a positive impact on GDP of 0.6% per year, and in Companies, of 0.2.

With official graphics, the document that has been in the making since May insists on the relationship between low taxes and business creation, and between attracting investment and GDP growth.

Pressure or effort
The White Paper on Tax Reform recovers the debate that underlies the consideration of tax pressure as an indicator required by a state from its taxpayers. So much so, that the Government of Pedro Sánchez has already announced the intention of raising two points of fiscal pressure in order, in its opinion, to reduce the gap in 2050 with the rest of the European Union.

Well, relying on financers, the White Paper emphasizes that there is practically unanimity in defending that the ideal instrument is the fiscal effort and not the fiscal pressure – that is, the relationship between the fiscal pressure and per capita income.

Thus, and for practical purposes, the text uses the tax burden of Germany against Spain; 41.50% versus 35.20%, respectively, which is undoubtedly more than six points. But he immediately explains that, with a tax burden of 41.50%, Germans have a per capita income of 40,120 euros, while a tax burden of 35.20% only corresponds to a per capita income of 23,690 euros, which denotes the sacrifice or fiscal effort of the Spanish taxpayer.

In addition, and now that the Madrid president is preparing to implement the reduction of 0.5 points of personal income tax in her autonomous section, with data from the Tax Agency, Madrid shows that the collection for this concept has exceeded 40% of the total collection of 2019, to 45% in 2020.

Against the black economy to avoid raising taxes
The underground economy encompasses one of the noteworthy sections of the Madrid Tax Reform White Paper. In its pages, the high percentage that Spain still maintains this matter stands out. The document refers to the Spain 2050 report, where 20% of the underground economy is admitted, although the IMF speaks of 23% in Spain.

Not in vain, the Community of Madrid reflects on this and affirms that with this high percentage, that is equivalent to about 210,000 million euros. And he points out that, by reducing this rate to the level of the EU, as in Germany, to 13%, it would recover in tax collection in the order of 20,000 million. With this approach, Madrid defends in its reform that the improvement in collection does not then make it necessary to increase the tax burden to 37% in 2030.

In terms of tax competition, Madrid emphasizes that between regions “acts as a mechanism to discipline regional governments and allows taxpayers to vote with their feet, offering them a plurality of tax regimes to which they can benefit.”

Meanwhile, in one of the autonomies whose president is most critical of Madrid’s fiscal policy, the Valencian Ximo Puig, its big businessmen have included the reduction of taxation as one of their protest axes. This was stated by Vicente Boluda, president of the Valencian Association of Entrepreneurs (AVE), which groups 162 of the largest businessmen. As he explained, the fact that personal income tax with the same job is taxed up to six points less in CCAA such as Madrid means a loss of competitiveness to attract talent that worries large companies.

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