Professor of Economic Analysis, University of Valencia; and Ex-Secretary of State for the National Treasury
Something is wrong with our system
The problem isn’t tax rates: Spaniards pay rates similar to those of other European countries. The issue lies in the narrowness of tax-assessment bases (due to the high quantity of deductions, exemptions, and preferential treatments available) and the significant rate of tax fraud. Fraud is the most serious threat to the smooth running of the tax system: it creates imbalances in the set of taxes,distorts competition, reduces effective revenue collection, and forces compliant taxpayers to shoulder a greater tax burden.
Professor of Public Finances, University of the Basque Country
Weaknesses in the design of the tax system
The central problem in Spain’s tax system is that it is full of loopholes that allow the country’s enterprises and richest individuals to evade taxation. The result is an unfair system with a very limited revenue-raising capacity. This weakness has only been made clearer by the crisis. Spain’s personal income tax (IRPF) should be a progressive tax reflecting each taxpayer’s capacity to pay. In relation to corporations, the aim must be to ensure the neutrality of taxes and that everyone excepting financial institutions pays the same rate. Spain should be looking to aim for a VAT system with few exemptions and a single rate.