As was expected, the tax amnesty program that the government approved in hopes of raising 2.5 billion euros in hopes of raising 2.5 billion euros in tax revenues this year is not having the results that people had hoped for. And if from now until November more taxpayers do not tax advantage of the measure, it could turn out to be a total failure.
The government's monthly tax report showed in July that the Ministry of Finance has raised 50 million euros from the program. This is hardly 2% of what it wanted to raise. Some have made the argument that the Peoples' Party have fought against the measure, preventing many people from utilizing the tax amnesty program while waiting to see what the courts say, because if a judge rules against them, they will be in a tricky position after admitting to the Ministry of Finance that they avoided taxes.
Of course, the legal implications will influence taxpayer choices, but that doesn't mean that the legal design of the tax amnesty plan has many defects. The most important consideration is that experience shows that tax amnesty is not an effective or fair solution, especially for those who actually their taxes.
Spain's tax situation closely parallels its financial sector reform. It took three bills to approve a bad bank. For not raising the VAT even though the EU mandated that measure, the Ministry of Finance first raised the personal income tax. Then it launched the tax amnesty measure. And ultimately it had no option but to finally raise the VAT.
The Ministry of Finance should proceed with caution because neither expenditures nor revenues are aligned with the national budget, and there is little room to make changes before year end.
