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FACTDROP: SPAIN: 'Rich Must Share Cost of Crisis'


SPAIN: 'Rich Must Share Cost of Crisis'

Πηγή: The International News Magazine
By Raquel Martínez Oct 12 2011

MADRID, Oct 12 (IPS) - As global working-class outrage against corporate capitalism explodes in
organised protests around the world, scores of citizens in Spain are demanding
an end to tax breaks for the wealthy.

At a time when austerity measures have slashed public spending on essential services such as healthcare
and education, thousands of people in over 166 cities across Spain, loosely organised around the 15-M
movement, have been calling for higher corporate taxes, so the wealthy can "share the cost of the crisis."

Disgruntled citizens also called for a referendum to decide on the advisability of constitutional reforms
that established a cap on Spain's public debt, which currently stands at 702 billion euros at an annual cost
of 25 billion million euros, according to the Bank of Spain.

Despite these demands, the reforms were negotiated without a referendum.

The bulk of the country's tax burden falls on the shoulders of middle- and working-class people, who
currently fork out 80 percent of their wages in Personal Income Tax (IRPF), according to the Organización
de Inspectores de Hacienda del Estado (IHE).

Francisco de la Torre Díaz, spokesperson for IHE, told IPS, "The economic crisis has (exacerbated) tax
disparities in two ways: firstly, through the increase in indirect taxes (like the Value Added Tax, or VAT) to
18 percent, which is regressive by nature; but mainly because of the significant decrease in corporate

Last month, in what many believe to be a token gesture, the patrimony tax, or property sales tax, which
was abolished by the government in 2008, was reinstated for the next two years to alleviate tax pressure
on average wage earners.

But the added weight of this tax on the total taken in by the Agencia Tributaria (AEAT), an office similar to
the Inland Revenue Department, is negligible - less than 0. 5 percent, according to IHE.

"Most (of the big) 'Forbes magazine' Spanish players are barely affected by this tax, since a large amount
of their patrimony is not tributary," Torre Díaz told IPS.

"The taxes extracted from the highest incomes earners, a large percentage of which are companies, have
been steadily decreasing over the years," Torre Díaz told IPS.

"Between 2007 and 2010, corporate tax collection had dropped by 64 percent, meaning the state went
from receiving nearly 45 billion euros to less than 16 billion euros," he added.

This represents a significant loss of revenue to the government, funds that could be utilised to subsidize
the public programmes currently on the chopping block.

In addition, Observatorio de Responsabilidad Social Corporativa (Spain's observatory on corporate social
responsibility) estimates that a full 80 percent of the companies on IBEX 35, the stock market index of
Spain's principle stock exchange, have money in tax havens.

Susana Ruiz, policy advisor for Innovative Financing and Private Sector Campaigns at Intermón Oxfam,
pointed out the dangers of promoting investment abroad by Spanish companies, while simultaneously
maintaining lax standards for taxing them at home.

"Stronger accountability measures should be put in place to avoid tax evasion by these big companies,"
she told IPS.

"Their dark structures not only allow the diversion of profits on which taxes should be paid domestically,
but also encourage money transfers to tax havens, which enables corporations to dodge tax payments in
developing countries where they are carrying out their main productivity or extractive activity," Ruiz added.

A further cause for alarm is the lack of political will among the Group of 20 (G20) - representing some of
the most economically and politically influential industrialised and developing nations - to bring an end to
these fraudulent practices, which have dire ripple effects like massive drugs and arms trafficking.

The 'country by country reporting requirement', that demands that multinationals present detailed
accounts for each and every country of operation, have not even been included in the G20 agenda for the
next meeting slated to be held in France, Ruiz told IPS.

Aside from multilateral efforts, the Spanish government itself has considerable leeway to restock its state
coffers, according to economist and development expert Manuel de la Iglesia-Caruncho,

He told IPS that according to the most recent figures released by Eurostat, the statistical office of the
European Union, the average income of 27 EU countries rose to 35.8 percent of GDP in 2009, while Spain
grew by just 30.4 percent.

Iglesia-Caruncho stressed the necessity for the wealthiest corporations to correct the country's many
deficits by paying higher taxes. Fair tax payments by corporations would lead to a reduction in the fiscal
deficit, an end to runaway speculation in financial markets and an immediate improvement in public
services, he said.

"But only," he cautioned, "on the condition that these additional resources are used efficiently in
employment- and knowledge-generating activities such as investment in productive and social
infrastructure, health, education, research and development (R&D) or the environment."

Iglesia-Caruncho also challenged the dominant argument against tax increases - based on the notion that
withdrawing resources from the private sector would deprive economic operators of incentives, thereby
leading to an overall reduction in consumption - by pointing to the example of many Scandinavian
countries that collect high taxes and still enjoy high growth and consumption.

These states, he added, are protected from market shocks and failures by properly redistributing social

Corporate adherence to fair tax standards will not necessarily lead to a contraction in economic activity,
since "aggregate demand is maintained by increasing public expenditure and encouraging economic
operators to continue investing," the expert told IPS.

The Spanish Parliament has currently been dissolved prior to the Nov. 20 general election. However,
despite the period of relative government inactivity many believe that, at the very least, the crisis has
sparked a lively public debate that has put the necessity of a fairer and more just tax system back on table.

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