Informe sobre medidas tributarias ante la crisis de la covid-19: es tiempo de reformas

'Coronataxes' to sustain public finances

The Spanish think-tank Fedea releases a report with tax-related proposals in respect of the coronavirus crisis. Once the worst of the crisis is over, temporary “Coronataxes” are proposed to finance the extraordinary expenses caused by the pandemic and reactivate the economy. In the long term, it recommends a series of permanent and structural reforms to improve state finances. In both cases, public spending would need to be rationalised.

The authors consider the fairest and easiest way to apply “Coronataxes” would be “through a surcharge on the personal income tax (PIT) that would be in force for a limited period until a certain balance is reached in public finances”. The PIT would be a general progressive tax and have these favourable features to fulfil its purpose:

  • The surcharge could have a significant collection potential. 
  • It would have no implementation cost, since it is part of Personal Income Tax (IRPF) payment.

The report provides a thorough long-term overview of permanent measures and reforms, which should aim to balance the structural deficit between revenue and public spending. Some of these measures would be:

  • Revising tax benefits (exemptions, reductions, deductions, bonuses, reduced rates, etc.) in Personal Income Tax, VAT and Corporate Tax. The report believes it could be a good time to remove the “Objective Estimation Regime” (the “modules”) and the “simplified VAT regime”.
  • In relation to the “Tax on certain digital services” proposed by the government, the report indicates that this type of unilateral measures can lead to multilateral coordinated solutions being adopted in the European Union or, even better, by the OECD.
  • Other recommendations include taxation on alcoholic beverages, tobacco and fossil fuels like in major European countries, building on current environmental taxes, reforming the wealth tax and the successions and donations tax and continuing the fight against tax fraud.

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