Finance Minister Cristóbal Montoro believes that the fight against fraud will yield enough revenue to balance the budget, adding to the effects of a slight uptick in consumer spending and increased corporate and value-added taxes.
Trying to reduce the negative impact of the underground economy, Montoro will task the Tax Agency will another 700 cases in hopes of raising more than 10 billion euros. According to expert opinion on the Spanish national budget, he'll need it. Bank of Spain governor Luis María Linde doubted the revenue forecast last Wednesday, because he questions what effect cutting the personal income tax will have on consumer spending.
Calculations that a VAT increase would bring in around 7.2% more in tax revenues did not consider higher inflation, which will counter the effects of boosting the VAT. An extra 4 billion euros in corporate taxes will not have much of an effect either.
In any case, if tax revenue predictions are off somewhat in the year ahead, the most important thing according to governor Linde is that Spain makes cutbacks that allow it to meet its annual deficit goals. This is an election year, which means that the temptation to sidestep cutbacks will be high until after all votes are cast.
