September 29, 2016 / 12:56 PM / a year ago

Spain aims to raise 8 bln eur with tax change to meet deficit

MADRID, Sept 29 (Reuters) - Spain’s acting government aims to raise 8 billion euros ($9 billion) by year-end as it battles to meet deficit goals by requiring companies to pay more of their tax bill upfront, a spokeswoman for the Treasury Ministry said on Thursday.

The ministry has been briefing political parties on the plans for the tax overhaul, which is due to be signed off in a decree by the cabinet on Friday, the spokeswoman said, confirming reports in Spanish newspapers.

The caretaker government, run by the conservative People’s Party (PP), had previously projected it would get 6 billion euros from the tax changes.

Spain is maneuvering to avoid a potential fine from the European Commission for failing to do enough to trim its deficit at a time when a political deadlock is heightening uncertainty over how well it can control the budget.

Parties have been unable to forge a workable government for nine months after two consecutive national elections left Spain with hung parliaments. That has hampered plans to draft a new budget for 2017 in line with deficit goals and means 2016’s budget will instead be rolled over.

Brussels recently relaxed Spain’s deficit targets for 2016 and 2017, but even as economic growth powers ahead, doubts are growing over how even these new goals will be met.

The Bank of Spain forecast on Thursday that the deficit would end 2016 at 4.9 percent of output, very close to the 5.1 percent deficit of 2015 and above the 4.6 percent set by the Commission.

“If new measures are announced, the target would be more achievable ... but we’re not in a position to assess whether these measures will be enough,” the central bank’s director general for economics, Pablo Hernandez de Cos, told a news conference when asked about the tax changes.

He warned Spain needed to curb public spending with a more “restrictive” budget policy to meet deficit goals.

Corporate tax income has slumped this year after a reform by the PP which, as of 2016, meant businesses paying their taxes in installments did not have to pay a minimum established amount every time and could settle the balance much later on.

The PP now aims to reintroduce this minimum threshold for each installment, setting it at 25 percent of banks’ profits and 23 percent for companies, the spokeswoman said.

This will affect businesses with more than 10 million euros in sales, around 9,000 firms. The bill, which has angered business lobbies who warn it could endanger some companies’ solvency, will still need parliamentary approval. (Editing by Paul Day and Alexandra Hudson)

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