Rajoy: Spain has no immediate plans for VAT changes

PM confirms plans to meet with Rubalcaba to agree common front for EU summit

Spanish Prime Minister Mariano Rajoy said Wednesday that his conservative Popular Party government has no plans to introduce amendments to the current value-added tax structure.

The Popular Party leader’s remarks followed comments the previous day in which he said there would be no increase in current VAT rates but left the door open to “explore” recommendations made by the European Commission, which has suggested that some goods and services could be moved from the super-reduced rate of four percent to the reduced rate of 10 percent or to the standard rate of 21 percent.

Rajoy was speaking in Brussels where he arrived for a meeting accompanied by his full economic team, including Economy Minister Luis de Guindos, Finance Minister Cristóbal Montoro, Industry Minister José Manuel Soria, Public Works Minister Ana Pastor and Agriculture Minister Miguel Arias Cañete, along with Foreign Minister José Manuel García-Margallo.

Brussels last week conceded Spain two more years to bring its public deficit back within the European Union ceiling of three percent of GDP. In return, it has set the Rajoy administration a strict timetable for implementing reforms of the country’s fiscal and pension systems and to deliver a review of the effectiveness of labor reforms introduced in February of last year. The pension reform is expected to be delivered by the end of this year and the overhaul of the tax system before the end of March next year.

In addition to increasing VAT revenues, Brussels wants higher taxes on energy and the elimination of some tax breaks for companies.

The reform of the pension system recommended by the Commission is in line with proposed changes being drawn up by a group of experts, which include decoupling pensions from inflation and linking them to life expectancy levels, as well as speeding up the process of raising the official retirement age to 67 from 65.

Rajoy asked the Commission to push ahead with plans to relieve high levels of youth unemployment, which in Spain hit an unprecedented 57 percent in the first quarter. He proposed that incentives given to companies to hire young people should not count toward the calculation of the public deficit and called for the early disbursement of the some six billion euros due to be set aside to promote youth employment in the period 2014-2020.

Rajoy was due to meet European Council President Herman Van Rompuy later Wednesday as part of preparations for a European Union summit to be held June 27-28. Rajoy confirmed he will meet with the leader of the main opposition Socialist Party, Alfredo Pérez Rubalcaba, to forge a consensus on the stance Spain will take at the summit.


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