Miguel Ferre, the Secretary of State for Finance, unveiled yesterday during an elEconomista press conference the latest changes to his department's tax reforms that will be approved on Friday. The measure is a populist ploy and offers some new points, but at the end of the day it is needed in a country with an aging population that will tax the social security system.
People older than 65 years old that sell any retirement assets in order to generate constant income will not pay taxes on these extra earnings. Until now, the Finance Ministry's tax reforms had not allowed savers to include various types of financial products in their retirement accounts so that they could complement state pensions. But the realistic fear is that an increasing number of pensioners will sap the social security system and force Montoro to turn off the faucet. The bill also aims to improve the tax efficiency of other saving products, such as one called PIAS, by reducing from 5 to 10 years the minimum time that you have to hold an investment before getting a tax benefit. The last-minute touches are good and expected from a government that wants to curry favor heading into elections, but they are not good enough.
Spain's state retirement system needs to encourage private citizens to save for retirement, because mounting numbers of pensioners in years to come will force the government to slash how much each person receives every month. Measures like the one that was announced yesterday are a solid step in the right direction.
