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Spain agrees on temporary wealth tax, hikes for big earners

MADRID (AP) – Spain’s Socialist-led coalition government said yesterday that residents whose wealth exceeds EUR3 million (USD2.9 million) will be subject to a new asset tax in 2023 and 2024.

Finance Minister María Jesús Montero described the temporary wealth tax, which she said will affect 23,000 people, or 0.1 per cent of taxpayers, as one of “solidarity”.

She said people with holdings of EUR3-5 million will be taxed 1.7 per cent and those whose personal worth is EUR5-10 million will be taxed at 2.1 per cent. Individuals with fortunes above EUR10 million will pay 3.5 per cent.

The tax is part of a range of adjustments planned for Spain’s upcoming budget aimed at alleviating the hardship caused by rampant inflation and soaring energy prices.

The government also plans to increase the income tax rate from 26 per cent to 27 per cent for people earning more than 200,000 euros. The capital gains tax for incomes above EUR300,000 will go up to 28 per cent, an increase of two percentage points.

An employee closes his cafeteria in Barcelona. PHOTO: AP

The Socialist party and its junior far-left coalition partner, Unidas Podemos (United We Can), agreed on the measures, which are expected to bring in EUR3.1 billion over the next two years. The government said the money would be used to finance initiatives to help people with lower incomes.

The government plans to reduce the income tax on annual wages of up to EUR21,000.

Montero said this will benefit some 50 per cent of the workforce given that the average annual salary in Spain is EUR21,000.

She said the changes would make Spain’s tax system “more progressive, efficient, fair and also enough to guarantee social justice and economic efficiency”.

The governing parties also agreed to reduce the sales tax on feminine hygiene products from 10 per cent to four per cent.

Spain recently approved windfall taxes on large energy companies and banks and has temporarily slashed the sales tax on natural gas from 21 per cent to five per cent.

The annual inflation rate climbed to 10.5 per cent in Spain last month.

Spain’s regional governments also have some leeway on taxation. Two of them run by the conservative Popular Party – the country’s main opposition party – have cut real estate taxes.

Regional governments run by the Socialists plan other tax relief measures for low income earners.

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