Revenues are still showing signs of weakness and spending cuts were less severe than in 2012. For example, holiday bonuses were restored for civil servants even though there was no good reason to do so. This is one of several reasons that the state failed to miss its deficit goal by half a percentage point.
Still, Spain's public administrations as a whole only missed the EU's target by a tenth of a point. Local governments had a budget surplus while the regions overspent by two tenths of a point. 2013 results show that revenues are flat even though the economy has improved overall in Q4 2013. Cristóbal Montoro's did not meet his earnings forecast, because the personal income and Sociedades taxes brought in 2.1% less than last year, which balanced out a 2.9% increase in VAT revenues. The Finance Ministry's tax-hike policy has not panned out. Taxpayers are carrying such a big tax burden that the increases are starting to have a negative effect. What happened with Loterías is the best example of that scenario.
Levying a 20% tax on lottery winnings in excess of 2,500 euros only raised 55% of what Finance expected, because a lot of people stopped buying tickets. The government should look at these numbers, nix its smug confidence and carrying out tax reforms that lower taxes and boost growth.
