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Wednesday, April 09, 2014 9:00 PM


Brussels Tells Spain to Raise VAT Once Again


The nannycrats in Brussels really don't get it. You do not hike taxes in the middle of a depression or coming out of a depression. Yet once again, and for the nth time, that is precisely the recommendation.

Via translation from El Confidencial, please consider Brussels Roadmap of Tax Reform

Note: This is an extremely choppy Google translation, presented "as is" instead of my customary edits.

The document is apparently technical. But has behind it an undoubted political. Not surprisingly, public weeks ago before the government will present its tax reform, and weeks after I did the Committee of Experts created at the time by the Ministry of Finance. And what the report of the European Commission is that Spain is facing a fiscal devaluation passing raise VAT. Therefore, the opposite of what has been said in public Minister Montoro.

In principle nothing new, but what is important is that for the first time, puts numbers. That is, clearly raises the government should lower taxes on labor, and, instead, increase the tax burden of indirect taxation (VAT) and excise taxes (snuff or hydrocarbons). Give a couple of Data to support this strategy. If the government reduces the tax burden direct point of GDP, unemployment would fall to the same extent. Or what is the same, it could create about 168,000 jobs immediately from current levels of employment.

The report of the European Commission insists again and again that the solution is to raise VAT, the impact on competitiveness is zero, since exporting firms do not pay. But with that hike planned results are not achieved, the Government to use the room for maneuver that has both environmental taxes as those related to home ownership is requested.
The notion that raising the VAT will increase jobs on the basis exporters don't pay is of course lunacy. Apologies for an "as is" translation but I believe I have the gist correct.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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