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TAX

Spain to tax the rich to offset inflation relief measures

Spain's left-wing government has said that from 2023 it will slap a temporary tax on the wealthiest 1 percent of the population to help pay for inflation relief measures.

SPAIN-TAX-RICH
Tax Minister María Jesús Montero believes it's unfair that regions such as Madrid and Andalusia are offering tax reductions to the wealthy whilst other regions are burdened with bigger tax collection commitments. (Photo by PIERRE-PHILIPPE MARCOU / AFP)

Tax Minister María Jesús Montero told La Sexta television channel it is important that “we can finance the aid” put in place to support “the middle class and workers”.

To this end, the government will impose an “exceptional” tax on Spain’s “big fortunes”, she said.

The tax will last for two years and affect “no more than one percent” of the population, Montero said.

“When we talk about rich people, we are talking about millionaires,” she added.

The minister did not provide details on what the tax rate would be or how much it would raise.

The announcement comes just days after Andalusia’s regional government decided to scrap its wealth tax for residents and non-resident homeowners with worldwide assets above €700,000, in a bid to attract higher earners to the southern region.

This has sparked a debate in Spain over whether it is fair for some regions (those governed by the right-wing Popular Party to be exact) to offer better tax conditions than others and then ask for an equal or bigger slice of the pie from the national state budget. 

Montero has accused regions such as Madrid, which has long been the region with the lowest taxes in Spain, of carrying out unfair fiscal competition, what’s referred to in Spain as ‘tax dumping’.

READ MORE: Why you should move to Madrid if you want to pay less tax

Spain’s leftist government in July introduced a draft bill to create a temporary tax on banks and power utilities to fund measures to ease cost-of-living pressures.

Spain is battling a surge in inflation as a result of the fallout from the war in Ukraine and the reopening of the economy after pandemic-related lockdowns.

The annual inflation rate hit 10.4 percent in August. It has remained in double digits since June, a level not seen since the mid-1980s.

The Spanish government has introduced a raft of measures to help people cope with soaring prices, such as free public transport, stipends for students to stay in school and subsidised petrol.

It says the measures amount to €30 billion  ($30 billion), or 2.3 percent of Spain’s gross domestic product.

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ENERGY

Spain is leading global push towards renewable energy: report

Spain, Germany, China and the UK are leading the world’s richest nations in the push towards renewable energy, a new report said Tuesday.

Spain is leading global push towards renewable energy: report

International non-profit Climate Group compiled the rankings of G20 countries based on both ambition and progress.

Modest climbers included Australia, India, the United States and Japan – while Canada and Brazil score poorly, despite existing high renewable electricity use.

“What we’ve recognised at the Climate Group over a number of years is the importance of the policy environment to enable rapid action on renewables,” Mike Peirce, the organisation’s executive director of systems change, told AFP.

The report – published during New York’s annual Climate Week on the sidelines of the UN General Assembly – is designed with a group of 380 leading businesses in mind, called the RE100 companies, that have committed to go 100 percent renewable.

Twenty countries, including Spain as a permanent guest of the G20, were given grades from A to E.

Areas examined included net zero targets, renewable power target ambition, share of renewables in total installed capacity in 2021, and renewable capacity additions in 2021.

Spain, which got an A, was lauded for setting out to deliver “one of the most ambitious renewable power policies in the European Union,” with all new power capacity additions over the last decade coming from green energy.

Renewables accounted for 21 percent of Spain’s total final energy consumption in 2020, surpassing its goal of 20 percent, with plans to increase this to 43 percent by 2030 and 97 percent by 2050 when it is due to reach its climate neutrality goal.

India, which got a C, ranks fourth in the world for installed renewable power capacity with 158 gigawatts – but while there are key signs of ambition from the central government, the report cited high capital costs and grid connection challenges as significant headwinds.

Brazil and Canada were termed “stragglers,” both receiving Ds despite having an abundance of hydropower, with the report urging more diversification as severe droughts have put future energy generation at risk.

The percentage of renewables in Canada’s total final energy consumption slipped slightly from 25.8 percent in 2009 to under 25 percent by the end of 2019. While Canada is targeting net zero by 2050, it lacks any interim dates for checkpoints along the way.

To do better, countries must lay out strong roadmaps with key interim targets, implement financing solutions to drive investor confidence.

“As Europe buckles under the weight of the energy crisis, its leaders are regretting that they didn’t transition from fossil fuels faster. They mustn’t lock themselves in to further damaging emissions,” Peirce said.

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