Spain halves VAT on new house sales to clear stock overhang
The Spanish government is cutting a key tax rate in an attempt to boost the country's ailing construction sector and has announced plans to raise €5bn as it tries to get a grip on its borrowings.
Government spokesman Jose Blanco said yesterday that value added sales tax on new houses would be cut from 8pc to 4pc until the end of the year to help clear excess stock of unsold houses.
The cabinet is also planning to raise €2.5bn by obliging the country's largest companies with turnover exceeding €20m annually to pay taxes ahead of schedule until 2013. Another €2.5bn will come from reducing drug subsidy costs for regional governments by promoting generic medicines.
Finance Minister Elena Salgado also said Spain's government wouldn't have scrapped a tax on assets in 2008 if it had known how deep the crisis was going to be.
"If we had known about the depth of the crisis we would not have eliminated the wealth tax when we did," Salgado said. "In any case, it mainly affected the middle classes, which meant it doesn't serve the purposes for which it was designed."
The weekly cabinet meeting also approved previously announced measures to raise an extra €5bn for the exchequer this year, in a drive to ensure the public sector deficit is cut to 6pc of gross domestic product as planned from 9.2pc last year.
Half the money will be raised by bringing forward the date of corporation tax payments by big companies, and the rest by reducing the cost of pharmaceuticals for the public health system, partly by promoting the use of cheaper generic drugs.