Spain’s Treasury raises the VAT on health and educational services.

THE negotiation between the coalition partners of the draft of the 2021 Budgets in Spain is nearing completion but the tug of war continues until the last moment.

Two of them have to do with the attempts of the Ministry of Finance to limit the scope of the increase in personal income tax to the highest incomes and to capture in the Accounts something that was ruled out until recently, a VAT increase that in this case would affect services health and educational professionals.

Unidas Podemos, openly oppose the first, which would have caused the minister, María Jesús Montero, to abandon the idea. On the other hand, in recent days there have been criticisms from the business sector for the VAT on private health and education to rise to 21 per cent.

The rise in personal income tax to the highest incomes is one of the measures that appear in the tax reform that Pedro Sánchez and Pablo Iglesias signed in their coalition pact and perhaps the only one that is saved in the 2021 Budgets.

The Government has abandoned applying all the planned increases – also in Corporation Tax or on products and savings – due to the economic crisis that has caused the pandemic. Although sources close to the negotiation slide that there could still be some other fiscal “surprise”, the only safe tax increase will be that of personal income tax at the highest incomes.

However, in recent days a discrepancy between Montero and the negotiator of Unidas Podemos, the Secretary of State for Social Affairs, Nacho Álvarez has to do with how many people will be affected by the rise and, therefore, with how much personal income tax can be collected.

Montero has said that the rise only affects those who earn 150,000 euros a year, instead of from 130,000, the figure contemplated in the coalition agreement.
In this way, only 0.5 per cent of taxpayers would notice the increase. Specifically, 91,377 people, according to calculations by the finance technician unions, Gestha.

The idea has detractors within the coalition, considering that it could end up affecting public health and education. For example, an increase in the cost of medical tests in private clinics could cause an even greater saturation in public health, already stressed by the pandemic.

The rise in personal income tax and VAT on education and private health will be definitively verified in the draft Budgets that Sánchez and Iglesias will present on a date that is yet to be determined.

In this sense, Montero already assumes that this year the Accounts will not enter into force on the ordinary date, January 1. The current Budgets, those of the PP Minister Cristóbal Montoro for 2018, will still apply when 2021 begins. According to Montero, it will be a “technical extension” that he hopes will not last more than a few weeks in January.

We hope you enjoyed this article “Spain’s Treasury raises the VAT on health and educational services.”

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Damon Mitchell

From the interviewed to the interviewer

As frontman of a rock band Damon used to court the British press, now he lives the quiet life in Spain and seeks to get to the heart of the community, scoring exclusive interviews with ex-pats about their successes and struggles during their new life in the sun.

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