Bloomberg News

Spain Raises Taxes, Cuts Spending to Trim Deficit: Highlights

December 30, 2011

Dec. 30 (Bloomberg) -- Spain’s government announced tax increases and spending cuts to help bridge a higher-than- forecast budget deficit estimated for 2011 at 8 percent of gross domestic product.

Deputy Prime Minister Soraya Saenz de Santamaria and Budget Minister Cristobal Montoro announced the steps today at a news conference after a cabinet meeting in Madrid. The main steps announced are as follows:

Tax:

* Additional temporary income taxes for all taxpayers. The rate for the lowest earners will be 0.75 percent, rising to 4 percent for those earning 53,407 euros a year and 7 percent for those on 300,000 euros or more.

* New top tax band for those earning 300,000 euros a year.

* Additional tax on savings revenue. The rate for income of up to 6,000 euros a year will be 2 percent, 4 percent above that amount and 6 percent above 24,000 euros a year.

* Additional tax of between 4 percent and 10 percent on property values. The increase will be levied on the 50 percent of properties with the highest valuations in municipalities.

* All tax increases to apply for 2012 and 2013.

*Spending Controls:

* Salary freeze for civil servants.

* Increase in civil servants’ working week to 37.5 hours from 35 hours.

* Minimum wage frozen at 641.40 euros in 14 payments per year.

* Reduction of 20 percent in political party subsidies.

* Reduction in public broadcasting and railway company budgets of 200 million euros each.

* Delay until Jan. 1, 2013, of increase in paternity leave entitlement to four weeks from two weeks.

--Editors: Jeffrey Donovan, Jim Silver

To contact the reporter on this story: Charles Penty in Madrid at cpenty@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net


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