A series of increases to the VAT and personal income tax since the current administration took the helm have had a marginal effect on the national budget and crippling influence on economic activity. Between 2012 and 2013, the government's decisions only raised revenues by 1.6% of GDP.
In total, this is around 16 billion euros. To put things into perspective, the government made 23 billion euros in cutbacks in order to ease deficit spending during the same time period. Tax increases have also done little to reduce Spain's national debt, which has grown to nearly 100% of GDP. Tax reforms that will go into effect in 2015 will try to correct the situation, but in the forecast that Spain sent to the EU, it looks like flat revenues will persist through 2017. Among the 28 nations in the euro zone, Spain is eighth from the bottom in overall tax revenues and collects the lowest VAT revenues. To correct our budget imbalances, we need to rise up this list. Raising taxes was the wrong approach.
The Finance Ministry's tax reform plan lacks energy, and now that its hands are tied by debt and deficit agreements, systemic issues will be hard to fix. Still, positive changes in the other direction could boost economic growth and help the nation to collect more taxes. But again, raising taxes won't work.
