IMF on Spanish 2021 Budget

SPN International Monetary Funds IMFThe IMF has observed that this is not the moment to increase IVA in Spain, as the Central Government had planned within the 2021 budget proposal.

This would not be a general raise but on sweetened drinks (supposedly to discourage the consumption of sugar and thus tackle the growing diabetes problem in the population).

Far more controversial was the plan to raise the IVA on diesel fuel, which would have a serious knock-on effect on transport costs and thus consumer end prices.

In the opinion of the IMF these changes should wait until the economy is in a more robust state

The IMF Mission Chief for Spain, Andrea Schaechter, considers that if Spain is to increase taxation that it must judge very carefully the timing for it, otherwise it could have a damaging affect on social and activity sectors, which are precisely the hardest hits ones at the moment.

However, the IMF would look favourably on other measures such as tweaking the IRPF, especially concerning the savings of high-income earners or taxes on technological companies, which have clearly done well during the pandemic.

The national budget reflects the government being very optimistic (overly?) on generated income; a point of view that the IMF does not share. The Government hopes to cut back on the national debt by 3.6% because of this increased revenue as well as planning to increase spending to counter the pandemic-related economic down turn.

Some of the increased spending materialises in salary increases for public workers and pensions, which is also where Madrid and the IMF differ.

Finally, the IMF considers the Government economic growth projections for 2021 as ‘optimistic.’ The Government puts it at 9.8% whereas the IMF puts it at 7.2%. Both these figures are based on EU funds boosting the Spanish economy.

(Spain)

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