26 Jun, 2014 @ 12:00
1 min read

Lower taxes for all as Spain defies the EU to ease austerity measures

Mariano Rajoy

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.


  1. What a load of rubbish, when there is already so much tax evasion in this country with the black economy big than ever they think this is the solution!!!!

    The only thing that sorts this country out is a complete reform of labour laws. High social security not only kills most small business and also forced many breaking the law by half time contracts and the rest in black.

    I had a waiter work for me last year and he took his unemployment for six months after his girlfriend had a child, he has now found a job where his hours on his contract are 20hours yet he works 50 and still receives half his unemployment. Another girl I employed came from a job where she had a 2 hour contract and worked 54 hours a week at 3€ an hour, the restaurant she worked at never gave her any holiday and kept the tips.

    These two examples are how things work here, well in the south anyhow. The government needs to cut unemployment to a minual for those healthy enough to work and cut social security to about 10-15% instead of the 30-40% it is now. I for one would employ 2 more staff if this was the case but as someone who follows the labour laws can’t afford to.

    the cash in hand work here is such a large problem here that just addressing this would sort some of this countries short falls.

  2. Dec 2015 general election, reduce taxes as this approaches because the people are silly, same in the UK, Alex Salmond, millipeede and to a lesser extent Osbourne, defict gone in a few years etc, promise the earth, deliver little. Mark, I have read your posts over the years, they are spot on but all these politicians would rather keep their jobs and not create any waves.

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