Target: Spain’s Super-Rich

Government considers hiking income tax on Spain's highest earners

Under the proposed plans, the new levy would be imposed on net wealth in excess of EUR700,000, affecting an estimated 160,000 of Spain’s wealthiest individuals. Expected to yield around EUR1.08bn (USD1.48bn) a year for the government, the threshold for the proposed levy is around seven times the previous EUR120,000 2008 threshold to ensure that the middle class is protected from the measure.

The government's move follows an announcement by Spain's FinanceMinister Elena Salgado at the end of August, in which she explained that the government is currently considering the idea of reinstating an inheritance tax on high income earners, rescinded at the beginning of the economic downturn.

The tax, which was imposed upon transfer of a wealthy taxpayer's property, was rescinded in 2007.

The government is also reportedly considering hiking income tax on Spain's highest earners to generate a lesser sum, but it is anticipated that just one measure will be adopted. Set 2 per cent higher, a change to the highest income tax band would raise around EUR1.2bn annually.

Spain has yet to implement decisive fiscal reform like other embattled European nations, with political friction preventing a consensus on the way forward for the nation. It is anticipated that comprehensive measures to consolidate the deficit will only be announced after elections are held in November.

In accordance with its stability programme, Spain aims to reduce its public deficit from around 9.2 per cent of gross domestic product in 2010, to 6 per cent this year, 4 per cent in 2012 and finally to 3 per cent in 2013.

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