The budget mess in Spain just got a lot worse. Instead of corporate tax collection rising by the budgeted 20%, collection actually went negative. Personal income tax collection is also running behind target.
Via translation from El Blog Salmon Why Corporate Tax revenues Go So Wrong?
Negative Revenue During 2016
The latest data from the Treasury shows that the corporation tax collection is negative €539 million compared to €1.814 billion in revenue by 2015.
Never since the beginning of the corporate tax in 1995 has corporate tax collection been in negative territory.
There have been more refunds than payments as shown in the graph of tax revenue from 1995 to 2016.
The “State Budget 2016” forecast that revenue would increase by 20 percent.
The caretaker government expects corporate tax collection will improve as the year progresses, but not thought to reach budget targets.
Personal Income Tax Collection Will Also Fail
Also the collection of personal income tax has evolved worse than expected by the Government. There are great chances of not meeting the public deficit target this year as shown in the monthly tax collection report for May 2016.
Brussels is currently debating whether to punish Spain for failing to meet the deficit limit by 2015.
What Happened?
As an election ploy ahead of the December 2015 hung election, Rajoy rolled back tax corporate hikes. Corporations had effectively overpaid.
Blog Salmon says “If there is a third election in Spain, it is a certainty the deficit will not reach agreed upon targets with the European Commission.”
I will be more emphatic: Spain has a snowball’s chance in hell of hitting budget targets whether or not there is another election.
Mike “Mish” Shedlock
