The health crisis forced the community authorities to suspend fiscal rules, those rules that force countries to reach a certain level of deficit and indebtedness. Now, when the economy begins to see the end of the tunnel, the debate has opened as to what the rules should be when it comes out of the crisis. The Independent Authority for Fiscal Responsibility (Airef) advocates that they be reformed, creating different objectives and demands between countries. And also between the autonomies, in the Spanish case, opening the door for the Communities to have differentiated deficit objectives, depending on their starting point.
“It cannot be that there is a common objective that forces some Communities to undertake strong fiscal adjustments and others even allow them to spend more than in previous years,” said Cristina Herrero, president of the organization, in a conversation held together with the governor of the Bank of Spain, Pablo Hernández de Cos. Both have debated in a forum convened by the Ivie about what policies should be adopted after the shock of the economic crisis caused by the pandemic and have agreed on one term: fiscal consolidation. That is, to generate a medium-term roadmap that redirects public accounts towards more moderate levels of deficit and debt compared to the one that caused the pandemic and which, in the Spanish case, dragged on from before.
Herrero has advocated doing “pedagogy.” A term that has been taken up again to assume the aforementioned change in fiscal regulations, which allows the population to better understand what its non-compliance means and what supposes, to prevent those rules from continuing with the “legitimacy” problems that they currently have. The head of Airef has defended that objectives that are achievable will help to achieve them. Of course, he has emphasized that these objectives must be “enforceable”.
“I believe that the credibility of a fiscal framework lies in its probability of compliance,” Herrero assured. “We cannot be oblivious, any reform must start from the recognition of the starting situation to create credible paths that must be enforceable,” he emphasized.
In order to redirect public accounts, Herrero has indicated that it will be necessary to accompany this aforementioned reform of autonomous financing through less “paternalistic” fiscal rules with the Communities, a tax reform that makes spending and public revenues more efficient. The head of Airef has not specified the direction that these reforms should take, if it is by cutting spending or increasing income, although it has emphasized the need to review taxation in Spain.
Herrero has assured that during the current open debate on tax reform, “there is too much talk” about the creation of new tax figures or raising the tax rates on taxes that already exist. “If we stayed in those elements, it would not have been necessary to wait so long for the tax reform,” Herrero assured. For this reason, he advocates a reform of greater depth that focuses on the revision of “bonuses and deductions” of the taxes that already exist.
Although the head of the independent authority assures that she does not have the capacity to speak of specific figures, she has assessed the VAT situation. “We have a differential position with respect to other countries,” Herrero assured, pointing out that in Spain there are “more products at reduced or super-reduced rates” than in other European economies.