Monday, 22 August 2011

New home sales tax cut to 4%

(Illustration only)
SPAIN (Agencies)Among other measures announced after the weekly Cabinet meeting on Friday, the value-added tax (VAT, or IVA in Spanish) on new housing purchases was cut from 8% to 4% in an effort to find a solution to the stock of unsold housing and revitalize the construction industry in areas where there is, or might be, a demand, according to Minister José Blanco, who called it "an exceptional and temporary measure that will last until December 31st. The government is also aiming to save five billion euros from cuts in spending on medicines and through higher revenues from amendments to the corporate tax system. The latest budget measures come on top of an austerity drive already in place that includes public sector wage cuts and a freeze in pensions that aims to further reduce the shortfall in the government finances from 9.2 percent last year to six percent this year.>>>
(Source below: El Pais)
The slump in home-building has helped reduce construction's contribution to Spain's GDP has fallen to four percent from 10 percent. According to figures released Thursday by the European Union's statistics office construction output in Spain fell 43.7 percent from a year earlier, compared with a drop of only 8.1 percent in the EU.
There is an estimated pile of some 700,000 unsold new housing units built up during the excesses of a decade-long boom that burst over three years ago. Although houses prices have fallen continuously since then, experts believe they need to drop more to get the market moving again.

The Cabinet also approved spending cuts of some 2.4 billion euros on medicines, in part through the greater use of generic drugs. The prices of drugs with patents that have been on the market for more than 10 years will also be cut by 15 percent.

The government also gave the go-ahead for amendments to the corporate tax system for big companies that will add a further 2.5 billion euros to the government's coffers. Rather than increasing tax rate, the measures include changes such as eliminating the deductions allowed for goodwill in acquisitions. The move will affect 3,900 firms with annual turnover of over 20 million euros.
The government wants Congress to return from its summer recess to ratify the measures approved on Friday.

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