* Govt-appointed committee presents tax recommendations
* Corporate rates should be cut, loopholes closed
* Govt hopes for economic boost before 2015 elections
By Paul Day
MADRID, March 14 Spain must cut individual and
business tax rates and increase levies on consumer items
including alcohol and fuel to repair one of Europe's lowest tax
takes, according to proposals presented to the government on
The government will use the non-binding recommendations from
a group of experts to create a tax reform bill that will go to
parliament by June, Deputy Prime Minister Soraya Saenz de
Prime Minister Mariano Rajoy of the centre-right People's
Party hopes a major tax overhaul will energize an incipient
economic recovery and create jobs as he heads into an election
year next year.
A 26 percent jobless rate - one of the highest in Europe -
and painful austerity measures and tax hikes to rein in a steep
fiscal deficit over the past two years, have hit his popularity.
Many elements of the proposal, such as income tax reduction
for lower earners, were already unveiled by the government.
The new tax rules will come into effect from the beginning
The reform aims to widen the tax base to make the most of an
economic turnaround, rather than directly increase tax revenue,
which fell to 36.4 percent of economic output in 2012.
The 444-page proposal from the experts contains 125 reform
proposals and 270 tax changes which they claim would boost gross
domestic product by 0.2 percent and employment by 0.3 percent
over three years.
"The experts are agreed that comprehensive reform of the
fiscal system should allow growth and creation of employment,
accelerate fiscal consolidation and contribute to the reduction
of the high levels of external debt of the Spanish economy,"
said Manuel Lagares, head of the committee that wrote the
Spain's economy has been declining for most of the last five
years, hitting revenues and leaving the government struggling to
reduce one of the highest public deficits in the euro zone.
LOOPHOLES, EXEMPTIONS AND BLACK ECONOMY
Spain's tax take, over-reliant on revenue from a property
boom which turned to bust in 2008, has fallen almost 50 billion
euros ($69.64 billion) in the last six years and is plagued by
complicated loopholes, exemptions and a massive black economy.
Commissioned by the Treasury Ministry last year, the report
calls for cuts to income taxes and reduction of the corporate
tax rate and a progressive reduction of social security payments
A corporate tax rate cut to 20 percent from 30 percent would
be accompanied by the removal of numerous tax breaks which have
permitted most large companies to pay an effective rate of less
than 5 percent.
Meanwhile, the report includes a call for some products and
services to be moved out of the reduced value-added tax (VAT)
bracket of 10 percent and put into the standard 21 percent
category. Reduced tax rates should be maintained for the tourism
sector, which generates more than 10 percent of GDP, it said.
Housing and public transport would also continue to be taxed
at a reduced rate, though the report did not list the items
which would suffer a tax hike.
The proposal stopped short of removing items from the 4
percent bracket, aimed at basics such as bread, milk and school
books and was careful to note that any hikes would not have a
substantial effect on private consumption.
It also called for increases to environmental, alcohol and
electricity levies as well as measures against tax fraud. The
underground economy is believed to be worth around a quarter of
Spain's economic output.