The negotiation of the General State Budgets (PGE) between the partners of the government coalition is reaching its peak and Yolanda Díaz has already put Sumar’s main demands on the table. The second vice president and Minister of Labor demands, once again, that VAT be paid on activities related to private health and education (they are currently exempt). However, it seems very difficult to achieve her goal. Socialist ministries oppose this measure.
“Luxury services, such as yachts, have to bear a heavier tax burden. Those who have more have more to contribute“This debate is not about raising or lowering taxes, but about why private health care or private education is taxed at 0% VAT, and that is why we are going to make a proposal,” Díaz announced this week, in the Council of Ministers.
Although the Ministry of Finance is avoiding evaluating this initiative, sources from several socialist ministries exclude that the proposal of the leader of Sumar will succeed. And there are several reasons for this, both political and technical.
Support
On the one hand, there is the political argument. Taxing VAT on private education and health care with general state budgets would make it even more difficult to obtain approval from the Congress of Deputies.because that would mean losing support.
“There is no way forward with this. Neither the PNV nor Junts would vote on budgets with this measure“, indicates the socialist part of the government.
But there is more. There is also the technical argument. Activities related to private health and education are exempt from VAT in Spain, but also in almost the entire European Union (as indicated by the Independent Authority for Fiscal Responsibility -AIReF-). These are exemptions that are in line with the spirit of Community regulations.
Diaz’s proposal is therefore, in any case, an issue that should be addressed within a European framework and discussed with the European Commissiondespite the fact that Spain (and the rest of the Member States) has the power to repeal the exemptions. This is what the sources consulted indicate and what the tax experts that María Jesús Montero met to prepare the white paper on tax reform, in 2022, also note.
In fact, these experts advise against applying VAT to private education and health services, particularly because Many of these activities depend almost exclusively on the private sector.“like dental care or early childhood education.”
Thus, taxing these services with VAT would irremediably increase their price and make them difficult to access.
Taxing private health care and education is an old demand of both Yolanda Díaz (she pulls the proposal out of the drawer from time to time) and Sumar and Podemos. In fact, has been a regular talking point during the negotiation of new budgets since the formation of the coalition government..
AIRef estimates that removing exemptions for private health and education could generate additional government revenue up to 1,763 and 1,694 million eurosrespectively, although it must be taken into account that these data predate the Covid-19 pandemic.
