New fiscal measures to boost the Spanish economy and reduce the deficit

Barcelona (ACN).- The Spanish Government approved at this Friday’s Cabinet Meeting new measures to reduce its deficit and boost the economy. The measures can be divided in three: the VAT on the purchase of new built flats will be halved, largest companies will have to pay part of the Corporate Tax in advance, and doctors will have to prescribe only the active principal of the drugs, not the brand. According to the Spanish Vice President for Economy, Elena Salgado, the combined measures will enable the Spanish State to save 4,900 million euros this year. She also wanted to stress that her department has been largely studying these measures, which were already partially announced on July 29^th, before the debt crisis this August.

The first one is temporarily reducing the VAT of new build flats, passing from 8% to 4% until the end of the year. The aim is to help the recovery of the real estate and construction market by getting rid of the large stock of new built flats. The President of the Barcelona’s Construction Gild, Néstor Turró, thinks it is “a very positive measure” although he warns it will not be enough to accomplish the sector recovery. Salgado explained that despite reducing the VAT, she expects that the increase of purchases will compensate the possible loss for having a lower rate. This measure does not aim at getting more revenue but at reducing the stock of new flats and helping the construction sector.

The second measure announced refers to Corporate Tax. The companies in Spain with an annual turnout of more than 20 million euros and having profits will have to pay earlier the Corporate Tax payments. Companies have to pay Corporate Tax three times during the year. The modification is temporary and affects this last term and the entire 2011 and 2012. However, the Corporate Rate itself, the general base and the rate are not modified. Companies with an annual turnout between 20 and 60 million euros will have to pay in advance a maximum of 59,000 euros extra and companies with a turnout between 60 and 100 million euros will have to pay in advance a maximum of 250,000 euros. Elena Salgado stated this Friday at a press conference that this measure “is very limited and very easy to handle”. She compared the measure to the Income Tax functioning, which is partially paid in advance from the workers’ salary and then, if needed, is refunded by the State. Salgado stressed that it will only affect 4,000 companies from the 1.5 million businesses in Spain, and only those having profits this year. This change will bring around 2,500 million euros extra this 2011. The modification also affects on the short term the compensations for losses, although they will be recuperated on the long term.

The third measure focuses on saving money to the public healthcare by indirectly promoting the use of generic drugs. Doctors will have to only prescribe the active principal of the medicine, and not the commercial brand of the drug. The measure is expected to save 2,400 million euros this year, obliging the chemist to offer the cheapest brand or generic drug available.