In the strategy move to realign European budgets, the EU is preparing a reform of the continent?s value-added tax (VAT). It has to do with giving relief to current fiscal deficits and laying the foundations for avoiding this issue in the future.
The EU is trying to elevate tax revenues through this indirect form of taxation, but not necessarily raising the rate, but merely limited the casuistry of the cuts and widening the basis for imposing them while at the same time thinking about reducing the bureaucratic burden that is weighing on companies.
Certainly the EU is looking to unify the tax. In regard to this point, Spain would end up badly off. Even after the VAT increase of 2010, it continued to have one of the lowest VAT taxes in Europe. So Mariano Rajoy?s government, in addition to taking the reins and finding out the true condition of public accounts, will have to face growing pressure from Europe to impose a higher VAT.
The near, mid and long-term effect on our national debt, tax revenues, consumption and business margins will have to be scrupulously assessed. In any case, setting out the austerity plan and enduring spending cuts will be followed by tax adjustments, and the VAT is one that could have a rapid effect on savings if it is raised.
Now, the ulterior motive of the political economy was to return to solid growth, something that could be done by compensating for an increased VAT by lowering the price of goods.
