The Socialist Government of Spain intends to raise €11bn more a year according to new published tax increases that would also help to reduce the budget in the wake of the economic crisis. However, opponents were not convinced the measure would actually be helpful.
At the beginning of the summer many of Spain’s ministers stated that the country did not need to put up the taxes, but this past Saturday, the cabinet finally approved an ‘austerity’ budget for next year that would cut spending and increase taxes.
The new plan also throws out a €400 annual tax rebate that was enacted two years ago, before the housing boom came to a crashing halt. Public spending allotments will also be reduced by 3.9% in an attempt to curb costs.
Starting in July of next year, the VAT rate will rise to 18% and the VAT for businesses and hotels will rise to 8%. Economy Minister Elena Salgado said that the new tax measures will help to increase the gross domestic product of Spain by about one percent.