Spain to hike taxes on firms, the wealthy

MADRID: Spain plans to increase taxes on corporations and the wealthy to fund greater spending on infrastructure and health as well as rebuild its pandemic-ravaged economy, the government's draft 2021 budget showed Tuesday.

Public spending will be 10 percent higher than in 2020 and will include 27 billion euros ($32 billion) from a massive European Union coronavirus recovery plan, Prime Minister Pedro Sanchez said before meeting ministers who approved the plan.

The amount allocated to public spending is "the most ambitious in our democratic history," said Sanchez, whose Socialists govern in a minority coalition with the hard-left party Podemos.

Spain, one of the EU's worst-hit nations, is to receive 140 billion euros in grants and loans from the rescue plan between 2021-2026, making it one of its biggest beneficiaries along with Italy.

The draft budget outlines higher corporate taxes on big companies, increased income tax for high earners, and a hike in the value-added tax (VAT) on sugary drinks.

It also calls for the implementation of a so-called Google tax on revenues booked in Spain by tech giants and a financial transactions tax.

'New stage'

The extra revenue will help fund a 151-percent rise in the public health budget, which will receive an extra three billion euros.

Of that figure, 2.4 billion will be drawn from the EU funds to buy vaccines and strengthen Spain's primary care network.

Meanwhile, doctors across the country staged their first national strike in 25 years on Tuesday to demand better working conditions and greater recognition.

The government is also planning to boost spending on education and professional development by 70 percent, to increase research and development funds by 80 percent and to raise infrastructure investment by 115 percent.

"We are inaugurating a new stage in Spain's economic policy, which definitely leaves behind the neoliberal stage of austerity and budget cuts," said Sanchez deputy Pablo Iglesias, who heads Podemos.

The draft budget also calls for a 0.9 percent increase in civil servants' wages and some pensions in line with projected inflation, an amount unions quickly said was not enough.

They also demanded the government boost hiring.

"The public job offer is insufficient because it does not address the urgency of the situation, nor the structural needs brought to light by the pandemic," the CSIF civil servant's union said in a statement.

The budget plan will still have to be approved by parliament, where the government controls just 155 out of the 350 seats.

Ballooning deficit

Passing the annual budget has become very complicated in Spain in recent years with the emergence of new parties leaving the parliament increasingly fragmented.

Sanchez's first term in office ended with a snap election last year when he failed to win support for his budget, and he has been governing since with a 2018 budget that has been twice rolled over.

Spain's public deficit stood at 6.46 percent at the end of June and is seen rising to 11.3 percent by the end of the year.

EU finance ministers agreed in March to suspend stringent rules on running public deficits to allow member states to spend freely to tackle the impact of the pandemic.

The International Monetary Fund predicts Spain's economy will slump by 12.8 percent in 2020 due to the pandemic, in what would make it the hardest-hit country among the world's advanced economies.

The unemployment rate jumped to 16.3 percent in the third quarter with the total number of people out of work in Spain now reaching 3.7 million, national statistics office INE said Tuesday.