12 sep 2018
CEOE Board of Directors

SIGNS OF ECONOMIC SLOWDOWN ARE WORSENED BY ANNOUNCEMENTS OF TAX HIKES

They confirm signs of economic slowdown worsened by the announcement, without further explanation, of tax hikes, during a time in which an effort is needed to consolidate the economic recovery and we should aim for less uncertainty.

The quarterly report of the Spanish economy, prepared by the Research Unit of CEOE’s Economic and European Affairs Department, revised down the forecast for the Spanish economy. Their estimated GDP growth for 2018 is set at 2.7% (previously 2.8%) and at 2.3% for 2019 (previously 2.6%). Forecasts remain positive, but the expected slowdown is slightly higher for 2018 and somewhat more pronounced for 2019.

Economic outlook - July 2016
Economic outlook - July 2016 — ©Dreamstime

They confirm that the economy is starting to show signs of lower momentum in some of the elements that had reactivated the current growth stage, such as the low price of raw materials, especially oil, the decline in inflation, the strength of our main trading partners and the remarkable dynamism of the national tourism sector.

In addition, there is the uncertainty raised by the announcements about fiscal measures that the Government has been conveying to the public opinion ever since they won the no confidence vote. Measures such as the tax on technology, the tax on financial transactions, the specific tax on profits for financial institutions, the tax on diesel, the increase in corporate tax, the taxation on profits obtained abroad, the SICAVs, the SOCIMIs , etc.

Spain does not have a tax collection problem. In 2017, tax collection was at practically the same level as in 2007, the highest in the historical series, and the forecast for 2018 exceeds this level. What Spain does have is a problem with its expenditure and managing this expenditure, which they are trying to counteract with higher taxes at a time when what we need is to promote a consolidation of the economy, contain the deficit, reduce public debt, and recover companies and investment, and not “news to test the waters” among the public opinion, which create uncertainty and insecurity.

If we increase the cost of energy, financial costs, labour costs, fiscal costs, etc, it will have a negative impact on business investment and job creation.