Salgado Says Spanish Government Will Not Raise VAT
June 21st, 2011
The Government’s financial vice president, Elena Salgado, has responded to the suggestion of the Bank of Spain to raise VAT in order to generate more revenue, by saying that the Government “will not increase VAT, since it would have a negative effect on consumption”, as was argued at the European Commission. “To be clearer, the Government will not increase the VAT,” she added.
At a press conference to present the Ministry of Development’s advertising campaign on rehabilitation, Salgado said that “fiscal policy is the responsibility of the Government which then must be approved by Parliament”, to which she added that Government revenues are behaving as expected, and “it is not necessary to raise VAT to achieve fiscal consolidation.”
In the same vein, she praised Brussels’ decision to back down in its request to raise Spain’s tax as a counterweight to a reduction in social contributions, and stressed that the European Commission has been “sensitive” to the Government’s arguments. At this point, Salgado also rejected the possibility of reducing social security contributions, stating that “we should wait a bit before taking steps in that direction,” at least to see how the pension reforms progress.
On the other hand, asked about the proposal of the bank run by Miguel Angel Fernandez Ordonez to set expenditure ceilings in the Autonomous Communities , the Minister of Economy stated that “the regions themselves must decide” if they set an expenditure ceiling, given their “financial independence.”
While it is clear that the Stability Act “speaks of deficit or expenditure”, or similar, “the expenditure ceiling is a budgetary tool, not for deficit control”, which the regional administrations may impose if they so wish.
“Our constitution recognises the financial autonomy of the regions and it is they who must decide what budget is presented to their parliaments on the basis of income, and on the requirement of compliance with the deficit target,” he added, stressing that “where PSOE governs, the expenditure ceiling rules will apply”, which states that it does not exceed the average growth of nominal GDP.
House Prices
Moreover, as reported in Diario Sur, contrary to the Bank of Spain’s conclusion that house prices will fall by 25% in real terms since its peak in 2007, the Development Minister, José Blanco, also present at the event, stressed “It is not expected to drop much more.”
Also, on the 4.1% fall in prices reflected in the National Statistics Institute’s figures for the first quarter, Blanco noted that “the price of housing in some places has already bottomed out and is not expected to fall much further.” “In areas where there is more of a surplus of properties, prices may still be subject to some adjustments, but overall prices are set fairly and are not expected to change much more,” he declared.
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