The Ministry of Finance is having problems with its revenue stream. Montoro has been raising taxes for a year, but he still can't manage to increase revenues. The root of the problem is a lack of growth, and so long as the solution to that problem continues to elude ministry officials, revenues will not materialize. Further, the current tax policy seems unlikely to alleviate the problem. Spain's principal tax increases are affecting corporate tax rates and payroll taxes when the companies who can create jobs should get a lighter tax burden.
Businesses are angry with the government because they were promised lower social welfare taxes, but this did not happen with the 2013 budget. Investors are also disgusted, because in addition to increased taxes on short-term capital gains they will have to pay the Tobin tax that the Spanish government backed in a recent EU meeting. Clearly, it wouldn't be fair to blame the EU for the country's tax policy.
Mario Monti just lowered taxes in Italy. Meanwhile, Spain's Ministry of Finance hasn't been able to root out tax fraud judging by the low level of participation in the tax amnesty program.
It has been overlooked that the national budget should serve to inform taxpayers about where their money is going and what results tax measures will bring. But there is a 2.8 billion dollar discrepancy between the earnings that Spanish news media reported on and the figures that were sent to Congress. The tax system is in crisis mode, and it is necessary to carry out a deep reform in order to keep it alive and spark growth.
