Tax revenues down in 2012

Low revenues are plaguing this year's income tax season in Spain. In 2012, hikes to the personal income tax, corporate tax rate and the VAT allowed slight increases to the government's overall tax revenues -- but broke its promise to not raise taxes in 2012.

But now we are at the point where increasing taxes reduces tax revenues. The Ministry of Finance does not have any margin for error and some of the tax engineering ploys that it used last year (bumping up quarterly tax payments from corporations or delaying tax refunds on the VAT and personal income tax) will have a boomerang effect, because even though they will show up on the 2013 balance sheet and they have not actually cut the 2012 deficit.

The European Commission was forced to account for the modified numbers and raise Spain's deficit ratio to 6.9% of GDP. For the fifth year in a row, in 2012 families and companies earned less than they year before thanks to rising unemployment and prolonged economic crisis. Consumption nationwide has flagged, resulting in tax revenues falling to 2008 levels. Still, Cristóbal Montoro keeps declaring that no more cutbacks are needed in 2013 even though the Spanish economy is still mired in recession.

Between January in February, tax revenues fell 11.1%. Denying the truth won't erase it. To fix the tax problem, deep fiscal reform is needed in order to increase the tax base, lower tax rates and thereby increase overall revenues.