By Imogen Calderwood
SPAIN’S age of austerity could be about to finally end as income tax will finally ease.
Ignoring the views of the European Union, the government has announced an average decrease of 12.5% over the next two years.
It means the top rate of tax is falling from 47% to 45% in a bid to help kickstart the economy.
But income tax rates are due to fall in all income bands, under the new rules, which come in next year.
The rate for the lowest tax bracket will fall from 24% to 20% from January 1, and fall again to 19% in 2016.
Tax on savings will return to the level of 2011, while a new category will be introduced for families.
The government is also promising further support for the self-employed and homeowners who have defaulted on mortgage payments.
“The time has come for lower taxes for everybody,” said Finance Minister Cristobal Montoro.
The moves are proving controversial however, with both the European Commission and the International Monetary Fund feel that the tax reforms could limit Spain’s ability to meet its deficit targets.
Montoro is also resisting the EU’s request for further rises in IVA (or VAT) to compensate for the lower taxes.
Others who will benefit from the reforms include borrowers who have lost their homes after defaulting on mortgage payments.
The Mortgage Victims’ Association (PAH), a support group that has been demanding legislative changes, estimates 15,000 families could benefit.
With these reforms, the PP hopes to reverse its decision of 2011 – when their first act after gaining power was to raise taxes, with around 50 tax hikes during PM Rajoy’s first two years in office.
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