The ?necessary fiscal adjustment? is a priority that the Bank of Spain is trying to solve by adjusting the tax base.
Yesterday it published it´s 2010 Annual Report in which it notes that ?in regards to taxes, it is possible to support increasing the VAT and reducing tax benefits.?
The central bank explains that next to reduction in spending and given ?the necessary fiscal adjustment,? it cannot rule out ?introducing tax modifications.? Because the fiscal damage is mostly owed to tax reductions that do not ?leave room for hope that in the mid-term it would revert to levels seen before the crisis.? In this situation, one has to really consider the VAT increase. And keep in mind the possibility of lowering it.
The report talks plainly about ?an increase in income capacity? and explains that ?when tax increases are necessary,? they would be due to a relapse of the figures that distort growth and resource allocation. That is to say, those that tax real estate property and consumption.
Further, the Bank of Spain is threshing the reasons that they are advising to improve taxes such as the VAT. These kinds of taxes that took place at the beginning of July 2010 continue being beneath the median of what they are in countries of the Organization for Economic Co-Operation and Development.
