The International Monetary Fund (IMF) has appealed to Spain to implement “structural tax reforms” which include an increase in taxes on the richest and the removal of subsidies for businesses. This message is underlined in its recent report on the European region, which highlights the urgency of prioritizing public spending to achieve the necessary fiscal adjustment under new European Union (EU) regulations, which have been reactivated this year after being suspended in 2020 due to the pandemic.
As the debate over tax reform in Spain gains momentum, the IMF supports experts and political parties demanding changes to make the tax system more progressive and efficient. “Managing the necessary fiscal adjustment, while meeting growing spending needs, requires prioritization of spending and structural budget reforms“, indicates the report, published this Thursday.
The agency warns that to protect the economic recovery, adjustment must focus on reducing spending with a low fiscal multiplier, such as eliminating hiring subsidies. This also suggests that in the long term it is crucial to rassign spending programs to align them with current priorities and improve the efficiency of public spending.
On spending, the IMF proposes transforming general support measures into needs-based programs, which would free up resources to reduce the deficit and finance priority investments, such as infrastructure and vocational training. These recommendations come against a backdrop of growing pressure on European countries to rebuild their budgetary reserves following increasing budgetary imbalances. caused by the pandemic and the inflation crisis.
The Spanish government has committed to the European Commission to carry out additional tax reform, included in the fiscal and structural plan sent to Brussels on October 15. This plan aims reduce the public deficit over seven yearseven if the precise details of the reform remain uncertain.
