After having increased the tax burden continually since its term in office began, which clearly went against campaign promises, the Spanish government has followed the same pattern with Social Security taxes. The rates that companies and workers pay at the highest bracket are going up for the second year in a row.
The increases have nothing to do with so-called progressive rate changes, but the government?s plain and simple greed for more revenue. Social Security taxes will go up by 5% and affect 700,000 workers and cost companies an extra 500 euros per person annually. The fragile situation that the social security system's accounts are in (it had a 14-billion euro deficit at the end of 2013) does not justify the cocktail of rate increases, because these will not solve the underlying problem: the need to execute reforms that increase the financial sustainability of the system.
Rising Social Security taxes will wreck job creation, because it lowers the incentive for companies to hire highly qualified, high earning employees. Spain has the fourth-highest taxes in Europe. And company contributions to the tax are 8.5% of the nation's GDP.
In addition to unfulfilled promises, this policy runs against the policy recommended by the EU, IMF and OCDE. These organizations asked Spain to raise the VAT, but leave direct taxes alone and lower social security taxes so that companies would not have to struggle to create jobs. But the government turned deaf ears to the troika's advice, which could ultimately slow the recovery.
