Spain to reinstate wealth tax on Friday

 

Spain will reintroduce a wealth tax on Friday as a temporary measure to make the rich pay more to help end an economic crisis, Economy Minister Elena Salgado said on Thursday.

The extra tax revenue will help Spain meet tough public deficit targets as it battles to avoid being sucked into a euro-zone debt crisis which has led to international bail-out packages for Greece, Portugal and Ireland.

The tax will affect around 160,000 people, raising up to 1.08 billion euros per year, Salgado said. The wealthy will pay more tax in 2011 and 2012 and the income will affect the 2012 and 2013 budgets.

"The economic crisis makes it necessary to reinstate this tax, that will allow us to tax the wealthiest so those who have more contribute more to help us out of the crisis," Salgado said at a conference. Spain is targeting a public deficit of 6.0% of GDP this year, down from 9.2% in 2010. It aims to bring this down to 3% of GDP in 2013.

Commentators see the move as a bid to win back left-wing voters disenchanted with severe government austerity measures, even if it may do little to narrow a 15-point lead in opinion polls enjoyed by the right-leaning People's Party.

Government officials say the wealth tax would affect the better-off rather than the broad swathe of middle-class earners who paid when it was last levied.

The wealth tax brought 2.1 billion euros into government coffers when it was last levied in 2007.

A wealth tax is under debate in other members of the 17-country euro bloc, such as Italy, France and Austria.