On Tuesday, the International Monetary Fund presented its latest report on the Spanish economic situation, recommending higher consumer taxes and levies, lower corporate taxes, easier ways to reduce salaries of employees and lower corporate taxes amongst other measures.
The IMF believes there is scope for increasing indirect taxes, excise duty and ‘environmental’ levies as well as gradually removing the exceptions to the top rate of VAT, these seen as necessary to reduce the public debt.
It wants the Spanish Government to reduce corporate tax rates, but not below 20 percent, make it easier for companies to reduce salaries in times of economic difficulties and allow for more restructuring of debts in the case of insolvency so that companies can start up again.
The Spanish system already allows for some restructuring of debts but the IMF wants the government to go even further and allow for the ‘forgiving’ of a percentage of such debts. The IMF has already made requests regarding the insolvency of individuals running small businesses whereby the slate is wiped clean to allow them to start up again.
The new report says: ‘Consideration could be given to introducing a personal insolvency framework that would allow insolvent debtors to have a fresh start after having given up their non-exempt assets and a substantial period of good faith efforts to pay the outstanding debt’.
The report also calls for fiscal incentives to encourage firms to hire unskilled workers, a major problem in Spain following the collapse of the construction sector.
On the other hand, the IMF sees little scope for significantly cutting top personal income tax rates.