Government puts brakes on cash payments, increases income tax

Soraya Sáenz de Santamaría

SPAIN (Agencies) In a move aimed at reducing 'fiscal fraud' (i.e. tax evasion) the Government yesterday announced that it will be implementing limits on cash payments for certain transactions, and the use of cash not declared in the payments. These measures are similar to those set upin France and Italy, though details for Spain are pending. The Spokesperson for the Government, Soraya Sáenz de Santamaría said that is is 'unfair' that those who have most to declare (to the taxman) 'don't declare it, or declare less than they should.' She added that 'the situation is even worse than we thought', and that an extraordinary situation demands extraordinary measures. Some of these were signalled: tests on activities that are linked to the 'underground economy', using Social Security and Labour inspectors more efficiently, as well as tracing credit card usage and electricity.>>>

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The plan, says Sáenz de Santamaría, will work on three basic premises: an intensive fight against tax evasion through under-declarations, improvements in the collection of taxes and cooperation among the Central Treasury, the tax authorities in the regions and Social Security. At present there is very little exchange of information among them.

Improvements, too, to the online self-filing system whereby 'errors' in calculation can be brought to the attention of the taxman before the contributor incurrs a penalty. Large denomination bills, added the spokeswoman, also lead to fomenting tax evasion when paying for certain kinds of transactions.

The fight against tax evasion is one of the problems in some countries that have needed interantional bail-outs, such as Greece, which has put into effect similar plans. That in a country where the previous government said was as high as a quarter of its GDP.

Other measures

A special watch on banking transactions over €3,000 was an electoral promise of the PSOE in the general elections last November. Many believe that this had already been put into effect, possibly through the tax authorities themselves even though it has not been approved by Congress. In any case, this is likely to be officially announced in order to scare tax evaders.

In an interview with the Financial Times, the new Minister for Economy and Competivity, Luis de Guindos, said that changes have to be made in the Constitution regarding maximum deficits allowed to the regional governments and the exercise of more control over their budgets - one of the truly outrageous problems that Have brought Spain to the brink, where we still are.

The country's Public Administration, says Sáenz de Santamaría echoing De Guindos' word to the FT, must be reined in. There are some 4,000 entities, organizations, foundations and consortiums that are part of the Administration network.

As to reforming the financial system, De Guindos presented a report that, he says, will see the reformation applied within six months. In addition, he is to ask the Bank of Spain to make sure the top people in entities that have needed financial help with public money are not "rewarded with large sums after bringing these organizations to this situation."

Among other things mentioned at the press conference, is the fact that thee Government last Friday approved cutbacks to the tune of €8,900 millions, as well as an income increase of €6,275 million, to be carrried out through scaled income tax increases, details about which will be forthcoming next week.

© 2012 Alberto Bullrich