The deficit defines tax reforms

The government will release a tax reform report today. The reforms will be carried out by a team of experts led by Manuel Lagares. The Spanish Finance Minister, Cristóbal Montoro, has already warned that the actual reforms will not look exactly like the proposals that are on the floor today.

Most changes are a reflex to the government's need to meet its GDP/defict ratio goals, which suggests that tax cuts will be smaller than expected. In any case, Finance will compensate for some tax cuts by increasing other taxes. That is what happened with the VAT and Sociedades corporate taxes. Rajoy's government will tweak the personal income tax to improve its image before the next elections, but this wily move will not help the economy recover because it does nothing to improve the deficit problem.