Bloomberg News

Spain’s Socialists, PP Clash Over Taxes Before Election

October 01, 2011

(Updates with comments from PP and Socialist leaders from second paragraph.)

Oct. 1 (Bloomberg) -- Spain’s opposition leader Mariano Rajoy said his People’s Party will reduce taxes for companies if it wins the election on Nov. 20, while the ruling Socialists’ Alfredo Perez Rubalcaba pledged more tax to fund healthcare.

“One-person enterprises hiring an employee will be granted a 3,000-euro ($4,000) tax rebate,” Rajoy said today during a party meeting in Valencia. Rajoy promised tax breaks for companies investing to modernize and said the PP will reduce corporate tax rates for small and medium enterprises, “without any conditions”.

Speaking in Madrid, Rubalcaba said his party would raise taxes on tobacco and alcohol to generate 1 billion euros in 2012 to help cut the nation’s healthcare system’s estimated 2 billion-euro deficit next year.

Voters in Spain, the euro region’s fourth-largest economy, will head to the polls four months ahead of schedule as mounting expectations of a Greek default fuel a surge in the country’s borrowing costs. Polls indicate the PP candidate is most likely to win, inheriting an unemployment rate of 21 percent and public finances that showed a shortfall of 9.2 percent of gross domestic product last year, the region’s highest after Greece and Ireland.

Healthcare Funding

Rajoy said administrative rules for businesses are too rigid in Spain and that the elected-government should aim to make it possible to create a company within 24 hours. Rajoy said it is the PP’s priority to encourage investment and job creation because it is the best way to fund health care, education and pensions.

“If we want to protect the jewel in the welfare state’s crown, we must ask those who can to make an effort to do so,” Rubalcaba said during a three-day party conference discussing the Socialists’ political manifesto. The Socialists’ plan to preserve “cheap and good healthcare for all,” includes slashing tax breaks for companies offering private health insurance to their employees and claiming money from insurers to repay costs incurred to the state due to accidents, Rubalcaba said.

Spain’s Socialists argue the wealthy and banks should be taxed to fund measures to create jobs, boost growth and support the welfare-state. Party and government officials have accused the PP’s austerity plans, some of which have already been implemented by local PP governments in the nation’s 17 semi- autonomous regions, of “crossing the red line” and threatening “sacred” rights such as education and healthcare.

Rajoy may win the largest outright majority on record, with as many as 189 seats in the 350-strong Parliament and a 14.6 percentage-point lead, El Periodico reported on Sept. 26. A poll commissioned by El Pais, a traditional ally of Socialist administrations, gave Rajoy a 14.1 percentage-point lead on Sept. 12 with 44.8 percent of the vote against 30.7 percent for the Socialists.

--Editor: Dick Schumacher.

To contact the reporter on this story: Angeline Benoit in Madrid at abenoit4@bloomberg.net

To contact the editor responsible for this story: Mike Harrison at mharrison5@bloomberg.net


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