Mariano Rajoy said yesterday in front of Empresa Familiar, a Spanish non-profit organization that helps support family businesses, that the government will lower Sociedades corporate taxes. Cristóbal Montoro added that the tax cut will be applied to the nominal tax rate. With so few figures, it is hard to predict what impact these cuts will have.
The nominal tax rate is one thing, and another thing is the actual tax rate, which is what companies will pay after they take available deductions. A third is the midpoint tax rate, which is the average tax that companies pay in Spain. In Lagares' report, it is recommended that nominal tax rates should be cut and some deductions scratched. Rajoy specified that Spain will keep an R&D deduction, but it is possible that several others will go away as the government tries to raise its tax revenues from large companies, which are nominally much lower than rates paid by small- to mid-size companies thanks to cushy write-offs. If the government wants to help the small companies to create jobs, the most direct approach is to lower their Social Security contribution level. Rajoy promised to do this, but has not so far. Meanwhile, upcoming elections are inspiring Rajoy and Finance Minister Montoro to issue more airy promises about how they will change taxes. But it's impossible to decide whether they will yield any result without seeing a new tax bill passed.
Possibly, all this tax talk is just a strategy to win votes. Yes or no, it's curious that the Partido Popular has not named a candidate. And weak decision-making about a tax strategy meant to curry favor with voters who don't have a candidate to support is an ironic twist.
