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Spanish government cuts taxes on low wages to alleviate inflation

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The Spanish government on Thursday announced an income tax cut for the middle classes and low wage earners to offset the effects of inflation on purchasing power, amid a tax cut tug-of-war with the opposition.

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The tax reduction will benefit people with a salary of less than 21,000 euros per year, that is, one out of every two taxpayers, said the Minister of Finance, Maria Jesus Montero.

The total sum of the cut is estimated at 1.9 billion euros over two years, he said.

The government has also confirmed the creation of a temporary and exceptional tax for the richest taxpayers, in order to finance the measures introduced by the executive to mitigate the impact of rising inflation.

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East “solidarity tax on large fortunes”, which will be in force in 2023 and 2024, will affect people who have a net worth estimated at 3 million euros or more, that is, 0.1% of taxpayers, Montero said. This tax will contribute 1,500 million euros to the treasury in two years.

The announcements take place in the midst of a fiscal battle between the government of socialist President Pedro Sánchez and the regions where the main opposition party, the Popular Party (PP, conservative right), governs, such as Andalusia.

Spain It is a highly decentralized country in which the regions have extensive powers, including in fiscal matters.

These reductions -which in the case of Andalusia refer above all to wealth tax- were criticized by the left, which has denounced a policy of “tax dumping” that breaks the balance between territories, at a time when Spain faces numerous expenses.

Faced with galloping inflation, which fell to 9% in September after having exceeded the 10% mark for three months, Spain has multiplied in recent months measures to support the purchasing power of households, such as subsidies to fuels, the assumption of the cost of part of the public transport subscriptions and the increase in pensions.

The total amount of these different aid plans was evaluated by Sánchez at around 30,000 million euros, which is equivalent to 2.3% of the country’s gross domestic product (GDP).

Source: Gestion

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