Friday, September 22

Yes, it’s time to talk about taxes

The Committee of experts appointed by the Government released its White Paper on Tax Reform. It contains a detailed diagnosis of the Spanish tax system and proposes measures on some taxes. Measures that can be described as moderate, the result of consensus among a very large group of experts with various specializations.

The Government, convening said Committee, sought to buy time before addressing a very sensitive issue for society. But, exhausted that long period, the ball returned to the roof of the Government. And his response has been discouraging, indicating that now it is not time to talk about this issue.

It is disappointing that the political class robs us of a serene and fruitful debate on this crucial issue for our present and future. The opposition makes a crude speech: it identifies any attempt to talk about changes in taxes with a “fiscal blow”. The debate should focus on the amount and quality of public services that we all want to support, this being the basis for defining a fair tax system that adequately finances these services. This is also underlined by the Committee: “A key element is that society assumes and shares the need for global coherence between the level of provision of public services and… the tax burden.” But the opposition directs the debate towards the most arid part, financing via taxes, to hide the ultimate consequence of its political proposal, which is none other than to reduce the public offer of education, health or social services.

And the Government, with its refusal to talk about this issue (now it does not touch), plays along with this vulgar discourse of the opposition, since it seems to accept that any reform that improves and modernizes our tax system is harmful to citizens. Resigns to debate, to do pedagogy, to convince. And it intentionally confuses measures that could lead to a rapid and short-term rise in taxes, which are actually not relevant now, with a debate to address a comprehensive reform of our obsolete tax system, which is relevant, and with increasing urgency. .

It’s been a long time since we talked seriously about this topic. And this is still a good time to do it and tackle tax reform. These are the main reasons:

  • Our tax system is outdated. It urgently needs a rapid adaptation to current times. Globalization, digitalization, and other phenomena that have rapidly modified the functioning of the economy mean that the design of some taxes presents serious deficiencies, which lead to less than necessary collection and in a more unfair manner.
  • The public sector was facing a deficit of a structural nature, even before the strong tensions to which it is being subjected with the pandemic and the war in Europe. The Committee diagnoses, I think correctly, that, although we must redouble all possible efforts to spend more efficiently, “the data suggest that the largest Spanish public deficit has to do, above all, with what happens on the income”.
  • The chaining of such serious crises in such a short time has notably increased inequality in our society and created chronic pockets of poverty that we should not get used to. It is morally unacceptable. But, without resorting to ethics, high inequality limits economic growth and seriously threatens democracy itself, as unfortunately we are seeing in many countries.
  • Prolonging the situation of public deficit without seeking solutions poses a serious problem of intergenerational equity, with young people being the most affected.
  • Solidarity is fundamentally exercised by paying the taxes that correspond to us and not evading or evading their payment. The war has once again brought to light the vein of solidarity that Spanish society undoubtedly possesses. But the spontaneous reaction will run out. Fighting fraud with more determination would be the most powerful weapon to effectively exercise that character of solidarity.
  • It is proposed to end this war with economic measures. Russian oligarchs must be prevented from financing it. To do this, you have to chase their money, and that requires the West to put a greater limit on tax havens (the so-called havens). Yes, it is time to make decisive progress in reducing these refuges for money laundering. Beware, by doing so, we would make it difficult for the great rich on “our side” to avoid it. We would win all the others, hopefully we are willing to do it.
  • In this crisis, as in all, the great majority is harmed, but there are also some minorities who obtain huge benefits. Why not increase the retribution of those benefited by the war to the common coffers?
  • The most important reform measures of the tax system require a long time for debate, to seek consensus and for parliamentary processing. And the effects on public coffers take a long time to occur. We must talk as soon as possible about these measures to design the tax system of the future.
  • Our society has a tax education deficit of enormous magnitude. It has long been urgent to educate schools about the social value associated with paying taxes. That the political class avoids a calm debate on this capital question does not help either.

The Committee made a lengthy diagnosis and provided some proposals for improving the tax system, although it has avoided making them on some of the fundamental taxes. Quite a few proposals already appeared in reports from previous committees convened by governments led by the now first opposition party. It should serve to initiate a reform accepted by a broad representation of parliamentarians.

The war has shocked us all. It has tragically changed the lives of millions of people. In the field of the Spanish economy, it seriously threatens the recovery that we already glimpsed. And yes, some fiscal relief may be convenient, provided that its conjunctural and reversible nature is clearly reported. But, however harsh that reality may be, it cannot become an excuse to abandon the path of reforms that should allow this country to take a leap forward and take advantage of the new economic realities. And one of the urgent reforms is that of the tax system. A reform of the structures of the system to, adapting to the times, increase its potential and make it fairer. He used to play a long time ago, but now he plays even more.