IMF urges Spain to provide Autonomous Communities with “greater power to mobilise their own revenues”

Barcelona (CNA).-The International Monetary Fund (IMF) has called on the Spanish Government to provide Autonomous Communities “with greater power to mobilise their own revenues”. The IMF believes that “without reforms”, the Spanish regional financing framework remains “a risk for the achievement of fiscal targets”. Indeed, in a new report the organisation demands a “more automatic and stricter enforcement of targets”. Furthermore, it urges the Spanish central government to consider introducing “performance-based transfers” that take into account the “different economic capacities” of the Autonomous Communities. In addition, the IMF encourages Spain to reduce value-added tax exemptions, excise duties and environmental levies; and review the expenditure on health and education.

In its monitoring report of the Spanish economy, the IMF says it has seen “considerable progress”, but stresses that “adjustment is still incomplete and structural weaknesses persist”. In this regard, the text highlights that unemployment, “especially long-term and youth joblessness, is still very high” while the use of temporary contracts for new jobs “remains widespread”. In addition, the IMF believes that “the elevated public debt” continues to leave the economy “vulnerable to shocks”.

Therefore, the body chaired by Christine Lagarde believes that Spain “has room to raise revenues” and proposes a series of measures so the country can achieve this goal. The first of the measures is “gradually reducing the value-added tax exemptions” in order to bring Spain’s collection “more in line with other EU countries”. The organisation also stated that “there is scope to raise excise duties and environmental levies—especially in the current environment of low energy prices”. The IMF also noted the need to “tackle inefficiencies and special treatments in the tax system”. Regarding expenditure, it said that Spain could conduct “reviews”, “in particular in the areas of health and education”, taking into consideration “vulnerable groups”.

At a regional level, the organisation warned that “without reforms, the regional financing framework remains a risk for the achievement of fiscal targets”. “Reforms should aim to improve regions’ incentives to comply with fiscal targets while accounting for their different economic capacities”, says the report. In this regard, it proposes a “more automatic and stricter enforcement of targets” and “providing regions with greater power to mobilise their own revenues”. The text also recalls that the Market Unity Law must be implemented. This law states that a particular economic operator must be able to carry out its activities throughout Spain, without having to comply with the legislation of the Autonomous Community where it operates, only complying with the legislation of the region of origin.