The white paper in perspective | Economy

Spain has a very serious problem with its public deficit. Structurally and for many years, non-financial public revenues have not come to cover expenses and this generates a chronic imbalance that is one of the highest in the EU-27. In 2019, just before the pandemic, the European Commission estimates showed that our structural deficit exceeded 3% of GDP; today it is close to 5%.

A hole of this caliber is hardly compatible with the notion of fiscal stability and requires an energetic response in the medium term. A response that requires action on the revenue and/or expenditure front. The decision to follow one path or another is profound and essentially political in nature. As recalled in the white paper, this decision cannot be made by technicians. It is up to the citizens and their representatives.

Undoubtedly, the best thing for everyone would be that there would be no need to enter into tax increases or spending cuts because the combination of the following three levers would be sufficient: a reduction in tax fraud and tax avoidance, an increase in the efficiency of spending, and a favorable economic situation. The ideal would be for everyone to pay what corresponds to them, for public resources not to be wasted and for the Gross Domestic Product to increase rapidly, thereby increasing the denominator of all the ratios that define budgetary health. The white paper dedicates a section to how to improve tax compliance and expressly alludes (although it is not developed because it is not the task entrusted) both to the need to evaluate public spending to achieve greater efficiency, and to the role of economic growth in consolidation.

With the wish expressed in the previous paragraph we completely agree. However, experience shows that you have to be cautious, especially with the first two factors. In general, the results tend to end up well below expectations. My opinion is that we must put all our efforts, but be very careful when putting the numbers in the budget. Personally, I believe that the effect of the first two factors should be treated for the benefit of inventory in the year in which it occurs for the first time and, only if they are perceived as permanent, expressly incorporate them the following year.

Therefore, we return to the starting point. It is necessary to decide politically the combination in which the expense is adjusted and the ordinary income is reinforced. What does the data tell us? If we take those of 2019 for the EU-27 countries (those of 2020 and 2021 are distorted by the sharp drop in GDP and the reactions of governments and are not the best for analytical purposes) we find that, even correcting for the differences In terms of per capita income in the countries, public spending in Spain is below what might be expected. But income is even more so. Spain is not France or Belgium, where the high deficit is explained by very high expenses. The immediate explanation in Spain is in income.

In any case, it is true that there are countries much richer than Spain (the Netherlands, for example) that are balanced on a relatively low level of spending and income. Because it is politically just as legitimate to prefer and implement a level of spending and income around 35% of GDP, as it is to defend that the balance occurs above 45%. I repeat once again: it is a political decision. The important thing is to be consistent as a Society: we cannot claim to have income programs and public services that are very well endowed financially and not be willing to pay for them.

He knows in depth all the sides of the coin.

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In this context, what the white paper does is analyze the tax system, focusing on the issues mentioned in the Ministry Resolution that creates the group of experts, but also dealing with other central taxes in the Spanish tax system, such as VAT, special taxes and personal income tax. And in this independent analysis, problems to be corrected are identified, possible changes are suggested and new tax figures are explored. In a similar way to how an engineer who is asked to design a car and is concerned about aerodynamics, consumption or passive safety does it. But just as it is not the engineer who decides how fast you drive or where you travel, the people who make up this committee are not and cannot be the ones who decide whether to raise or lower taxes. That is you, as citizens, taxpayers and voters.

Santiago Penas Lake He is a professor at UVigo and a member of the Committee of experts for the preparation of the White Paper on tax reform.