The Spanish election results are moving the country away from pro-growth tax reforms while launching the government’s tax agenda, and the agenda of the Spanish presidency of the Council of the European Union, into uncertainty.
Cristina Enache writes on the economics of tax policy and is the author of the Spanish Regional Tax Competitiveness Index. She was formerly the Director of Research at Civismo, an economic research organization based in Spain. She also served as head of research at Institución Futuro, a regional think tank based in Navarra in northern Spain. She is also currently Secretary-General at the World Taxpayers Associations and General Manager of the Spanish Taxpayers Union, which she joined in 2016.
Cristina has a degree in economics from the Academy of Economic Studies in Bucharest and a master’s degree in Economics and Finance from the University of Navarra.
For many Italian banks, there hasn’t been a significant “windfall” to tax. The profit margins of Italian banks have been lower compared to other industries for the past two decades.
Canada is planning to join the club of countries that, in the past 3 years, introduced a digital services tax (DST) despite U.S. opposition and concerns expressed by Canadian businesses.
Capital allowances play an important role in a country’s corporate tax base and can impact investment decisions—with far-reaching economic consequences.
Given that wealth taxes collect little revenue and have the potential to disincentivize entrepreneurship and investment, perhaps European countries should repeal them rather than implement one across the continent.
It’s unlikely these implemented and proposed windfall taxes will achieve their goals of raising additional revenues without distorting the market. Instead, they would penalize domestic production and punitively target certain industries without a sound tax base.
In most European OECD countries, corporate income is taxed twice, once at the entity level and once at the shareholder level.
To make the taxation of labor more efficient, policymakers should understand the inputs into the tax wedge, and taxpayers should understand how their tax burden funds government services.
Instead of reforming and hiking the wealth tax, perhaps policymakers should consider whether the tax is serving its intended objectives, and, if not, consider repealing the tax altogether.
As tempting as inheritance, estate, and gift taxes might look—especially when the OECD notes them as a way to reduce wealth inequality—their limited capacity to collect revenue and their negative impact on entrepreneurial activity, saving, and work should make policymakers consider their repeal instead of boosting them.
At a moment when countries are trying to make production more environmentally friendly and shore up supply chain weaknesses, capital investment is critical. Rather than adopt temporary policies that phase out and expire, policymakers should focus their efforts on long-term reforms to support investment.
Many countries incentivize business investment in research and development (R&D), intending to foster innovation. A common approach is to provide direct government funding for R&D activity. However, a significant number of jurisdictions also offers R&D tax incentives.
Spain should follow the examples of Italy and the UK and enact tax reforms that have the potential to stimulate economic activity by supporting private investment while increasing its international tax competitiveness.
To recover from the pandemic and put the global economy on a trajectory for growth, policymakers need to aim for more generous and permanent capital allowances. This will spur real investment and can also contribute to more environmentally friendly production across the globe.
In many countries, corporate profits are subject to two layers of taxation: the corporate income tax at the entity level when the corporation earns income, and the dividend tax or capital gains tax at the individual level when that income is passed to its shareholders as either dividends or capital gains.
As Chile looks to the future, policymakers might want to follow the UK’s example. Policymakers should focus on growth-oriented tax policies that encourage private and foreign direct investment, savings, and entrepreneurial activity, increasing Chile’s international tax competitiveness.
In many countries, investment income, such as dividends and capital gains, is taxed at a different rate than wage income. Denmark levies the highest top capital gains tax of all countries covered, at a rate of 42 percent. Norway levies the second-highest top capital gains tax at 37.8 percent. Finland and France follow, at 34 percent each.
Denmark (55.9 percent), France (55.4 percent), and Austria (55 percent) have the highest top statutory personal income tax rates among European OECD countries.
The EU countries with the highest standard VAT rates are Hungary (27 percent), Croatia, Denmark, and Sweden (all at 25 percent). Luxembourg levies the lowest standard VAT rate at 16 percent, followed by Malta (18 percent), Cyprus, Germany, and Romania (all at 19 percent).
Value-added taxes (VAT) make up approximately one-fifth of total tax revenues in Europe. However, European countries differ significantly in how efficiently they raise VAT revenues. One way to measure a country’s VAT efficiency is the VAT Gap.