After announcing across-the-board income tax relief last week, the government is now promising more savings for the self-employed and for embattled homeowners.
Finance Minister Cristóbal Montoro told Efe news agency that low-earning self-employed workers — those who make no more than €12,000 a year — will have to pay lower income tax starting in July. The withholding rate once the reform goes fully into effect next year could be around 15%, compared with the current 21%.
The tax breaks announced by the ruling Popular Party (PP) are perfectly compatible with European Union deficit targets, said Montoro. This is because tax receipts are growing at over 5% this year compared with 2013, and also because all forecasts point at an economic pick-up in Spain next year. The government is predicting growth of 1.8%, although other analysts are talking about even higher growth.
The government is predicting economic growth of 1.8%
The greater the output, said Montoro, the more taxes are paid and the more jobs get created. He also stated that the government’s fiscal reform will raise GDP by half a point between 2015 and 2016, representing around €5.5 billion.
Other beneficiaries of the new tax reform include borrowers who lost their homes after defaulting on their mortgage payments. Individuals who returned the keys to the bank were paying income tax on a supposed capital gain resulting from a cancelled debt amount that was higher than the original purchase price.
Around 15,000 families could benefit from this measure, according to the Mortgage Victims’ Association (PAH), a support group for embattled homeowners that has been actively demanding legislative changes.
Also likely to benefit from further tax relief are investors who bought preferential bank shares and lost their life savings in the aftermath of the banking crisis.