A team from the European Commission confirmed yesterday how Spain closed the 2012 fiscal year. According to the government, last year's deficit was 6.7% of GDP. The EU figures that this number was 7% according to data through November of last year, but it will not make a final announcement until April after it has analyzes the finer points of revenues and expenditures. At this point, it doubts Spain's strength.
Citizens also feel suspicious of the lack of transparency shown by the national government. It does not make sense that it publicized year-end figures without explaining how it met the deficit objective or providing documents to show actual revenues and expenditures, documents which typically accompany an annual budget. Without giving precise explanations, Montoro assured that in 2013 Spain would continue to reduce the deficit as in 2012, but with no more tax increases or budget cuts. Experts consulted on the matter think that if new measures are not taken, the deficit will stay at the same level as in 2012 and it will be hard to drop below 7%. We have started the year with 4 billion euros less in tax revenues because businesses were able to defer their tax payments (the corporate income tax return must be filed and taxes paid within 6 months and 25 days following the close of the fiscal year. Corporations are required to make 3 advance payments of income tax in April, October and December of each year). With luck, the loss of revenue from deferred corporate tax filings can be made up for with the higher VAT that went into effect last September.
Spending on unemployment and government pensions will continue to increase, unless they are cut or civil servant bonuses are eliminated again. The public sector also needs drastic reforms, which means more cutbacks and tax reforms that will increase the national tax base. But Montoro continues to say that he will enact no more cutbacks. That is why the EU and Spanish taxpayers are suspicious.
