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May 16, 2014
May 16, 2014

Spain: An urgent call against the fiscal reform that the government is preparing

Source: El Diario  Category: On the crisis
This article is also available in: eselhr
Spain: An urgent call against the fiscal reform that the government is preparing

*Read the full text of the manifesto in Spanish and the list of signers here

  • Dozens of people from the academic, financial, and social research world have signed a manifesto against the fiscal reform.
  • They criticise the spiral according to which government expenditures are being cut while taxes are lowered as much as possible, especially for companies and high incomes.
  • “In all the countries that have built a strong welfare state, the progressive income tax is the largest source of revenue”.

The undersigned feel the urgent need to speak out as informed citizens and professionals who are concerned with the current direction of social policy, and in particular, with the fiscal reform that the government is preparing. We cannot remain indifferent in front of the apparent unanimity, by action or omission, of the political and economic elites around the supposedly unquestionable principles that exclusively serve liberal and patriarchal interests. Silence makes us complicit. We think that the social emergency in our country and the inevitable deterioration that the proposed antisocial policies will engender, requires a pact between those concerned. A pact to curb cuts of the already squalid social protection in Spain and to promote a change of direction that will lead to an equitable and sustainable society, both at home and globally.

1.    The Committee of Experts on Reform of the Spanish Tax System is illegal because its composition (8 men and no women) violates the Equality Law. We accuse the government of abuse of power, relying on the impunity that emerges from the fact that it is responsible for enforcing the law, which the government itself violates. It is not true that there are no female experts and, thus, the breach of law is unjustifiable.

2.    The recommendations of the Committee of Experts and the announcements of the government are one more step towards the dismantling of our tax, welfare, and public services system. Throughout the XX century a social consensus was formed that allowed countries like Spain to implement progressive welfare and tax systems despite resistance from a powerful minority. Institutions such as the World Bank, the IMF, and the European Commission, advocate for the privatisation and cuts in public services and benefits for the indiscriminate deregulation of labour markets, the lowering of taxes and employer contributions, and the reduction of the progressive income tax increasing at the same rate as indirect taxes, such as the VAT.

3.    This path does not lead to a new place but to conditions that are already experienced in many countries in the world as well as in Spain before the fiscal reform of 1977 (which created income tax as a progressive tax on personal income), before the health Act of 1986 (which established the universal right to public health care), and before the General Social Security Act of 1966 (which ensured public insurance for all workers and compensation for all the contingencies caused by loss of wages , etc.).
Without a universal welfare and public services system, which is impossible to maintain without a progressive and generalised tax system, we will have a society in which a large part of the population will be in the shadow economy. Consequently, these individuals will be without social protection, without pensions, and without health,& unemployment benefits. We will be left with a society with a level of public services even lower than today, a society with poor education and public health care, and a society without a public system of early childhood education & care dependency. In short, the population will be abandoned to their fate and in poverty, with low levels of social cohesion and high levels of violence.

These are the conditions in all countries that have failed to implement this universal system of progressive taxation, benefits, and public services, despite their governments announcing an era of post-neoliberalism. On top of statements or supposedly imaginative proposals, it is necessary to analyse the conditions under which the majority of the population in each country lives, to reveal the effects of different fiscal policies. It is true that our system needs to expand its scope of protection to include all unmet needs and all people who are still excluded. Notably, policies must eliminate those elements that refer to the imagined family consisting of a breadwinner man and caregiver woman away from employment, without income and rights.

But it would be very harmful to try to find substitutes or short cuts: the only way for social justice and sustainable economic development is a welfare system based on generalised progressive taxation and universal public services. This is the only model that gives all individuals the right to a life of equality.

4.    The spiral we are presently in, and must reverse, consists of several complementary elements: first, social expenditure is cut to the extreme with the argument that the government deficit is unsustainable. Second, taxes are lowered as much as possible (especially corporate and high income taxation) with the argument that lower taxes increase the consumption capacity of households and encourage companies to create jobs. Third, labour rights and wages are limited as much as possible with the same argument. Finally, it is intended that most women continue precarious part-time jobs, and that they leave their jobs when needed by the family with the argument that this can curve the population ageing.

5.    All these arguments are false. In order to counter them it is not necessary to appeal to complicated economic analysis; suffice to argue for the creation of welfare states on the basis of the widely accepted principles, which should be guiding the actions of the public sector in a democratic society, most important of which is “each receives according to their needs and each contributes according to their ability”; this principles is based on the fact that the vast majority of the population cannot meet those needs individually.

Today, history is showing us more clearly the effects of different political choices, and in particular of the one imposed herein. Another novelty is that the correlation of social forces has changed with the indispensable collaboration of professionals, “experts” and institutions that are trying to make the neoliberal doctrine appear neutral, scientific, or the only viable alternative. These attitudes are disastrous for society while concurrently producing huge profits for the major financial capitals. Let us present some basic evidence that is being refused today by the vested interests.

6.    Raising the VAT and lowering the income tax is pernicious: the high prominence of consumption taxes is problematic because they apply the same rate to all people, which means proportionally higher taxation of those who have less (remember that, due to their lower capacity to save, the poor consume a higher proportion of their income than the wealthy). Instead, progressive income taxation has a redistributive role. On the other hand, a weak direct taxation does not provide enough revenue to maintain good social protection.

In all countries that have built a strong welfare state, the progressive income tax is the largest source of revenue contributing decisively to the social consensus that enables the widespread acceptance of all taxes. Breaking this equilibrium discredits the system that the people chose and, as a direct consequence, increases the shadow economy, without workers rights, without possibility of citizen control over the products and the services. The available data in Spain confirm that tax evasion in the period 2003-2012 increased. The consequent loss of revenue caused by the increase of the shadow economy leads to further cuts, which deepen the de-legitimisation and so on. This is the downward spiral in which we find ourselves.


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