15 oct 2018
Presentation of the Budget for 2019

CEOE BELIEVES THAT THE FORESEEN INCREASE IN REVENUES OF €5.678 BILLION IS UNLIKELY TO BE MET

CEOE believes the foreseen increase in revenues of €5.678 announced by the Government is unlikely to be met.  This figure was announced after the extraordinary Council of Ministers held today, October 15th, and during which the main guidelines of the Budget for 2019 were made public, a Budget that will now have to be sent to the European Commission for validation.

Presentation of the Budget for 2019
  • The €1.2 billion estimated as revenues from the tax on technological companies seem excessive, since the collection forecast from the previous government, on a very similar tax proposal, amounted to €600 million.
  • Of the €1.5 billion corresponding to the net effect of the Corporate Tax modifications (net between the 15% minimum tax rate over the taxable base, the two-point reduction in the nominal rate for SMEs with a turnover lower than one million euros and taxing part of the profits obtained by foreign subsidiaries that are currently 100% exempt), the most significant revenue increase would come from the partial taxation (5% according to the announced figures) of the dividends received from foreign subsidiaries. This item, using tax figures for 2016, could contribute in itself €1.3 billion. However, this collection depends on the affected companies receiving from the subsidiaries the same dividends as in the previous years, and one cannot rule out a decrease in dividend revenues precisely because of the existence of this new tax obligation.
  • Regarding the increase in taxes from gas oil, the previous estimates set this revenue at €400 million, whereas the forecast has now gone up to €670 million

    In conclusion, the budgetary policy increases social expenditures, makes no mention of expenditures on sectoral and investment policies (except for R+D+i) and will include a tax increase, especially for the business sector. Therefore, the budgetary and fiscal policy is not appropriate to enable the consolidation of the Spanish economy’s expansive economic cycle.

    The Government’s macroeconomic scenario in which they’ve based this budget has been revised downwards in comparison to the forecast issued this past July. Specifically, GDP is expected to grow 2.6% in 2018 and 2.3% in 2019, one tenth less than the previously forecast. This revision has been due mainly to the lower momentum in the global economy, including the European economy, and the increase in oil prices.

    The Budget also specifies the public deficit goals, set at -2.7% of GDP for this year and -1.8% of GDP for 2019, which means postponing the fiscal consolidation process. Public spending will grow less than nominal GDP (3.1% and 4.1%, respectively), so its weight in GDP will decrease to 40.9% (41.2% in 2018), while the weight for revenues will increase six tenths to 39.1% of GDP. In addition, it has been advanced that there will be a primary surplus for said year, which will allow a reduction in public debt levels to 95.5% of GDP in 2019.