Tax revenues are not going to rebound any time soon. The government predicts that 2015 collections will be 2.3% less than 2007. Spain's low tax revenue situation is a serious problem that EU authorities and ratings agencies have been warning Spain about for a while. Critically, Spain spends about as much per capita as other euro zone nations, its equivalent tax revenues are weak.
Spain's tax collection efforts are worse than even Greece, which has a weaker economy. Plus, huge budget imbalances in Spain do not help. Our credit rating could drop if we cannot align spending and revenues in a way that trims the deficit and national debt. The 2014-2017 Stability Program does not seem to target this goal, and it looks like the government does not believe that its tax reforms will work and wants to delay making important decisions and pass the buck to the next administration. Winning the fight against tax fraud and the underground economy is a pipe dream, which is unfortunate because these areas account for 25% of the national economy.
On the spending side, Rajoy has thrown in the towel and lost the only opportunity that his administration had to enact reforms. It is a serious failure to let the health of the national budget depend on a possible economic recovery instead of structural reform. The government is showing signs that they will overhaul the tax system, but it is clear that this measure is not part of their economic plan.
