Spain Slashes Labour Taxes To Create Jobs

 

Mariano Rajoy has announced plans to significantly lower social security contributions for employers who recruit permanent members of staff.

During his State of the Nation address, the Spanish Prime Minister said that an upwards revision of the growth forecast for this year and next will enable the Government to lower employers' contributions to a flat rate of €100 a month for companies that create jobs. The favorable flat rate is to apply for the first two years, on condition that the new recruit is kept on the payroll system for a period of at least three years.

The measure aims to address the issue of high unemployment in Spain.

Rajoy said that the move will lower social security contributions for employers by up to 75%.

Furthermore, Rajoy said that the Government plans to raise the individual income tax (IRPF) threshold to €12,000 from 2015, and confirmed plans to increase family tax breaks. The tax reform is expected to benefit around 12 million taxpayers.

Spain's Confederation of Business Organizations (CEOE) welcomed as positive plans to introduce a flat rate social security contribution, emphasizing that the measure will dramatically lower recruitment costs for businesses. The CEOE also welcomed plans to raise the income tax exemption threshold.

Economic growth in Spain has been revised upwards to 1% of GDP in 2014 and to 1.5% of GDP in 2015. The Government had forecast growth of 0.7% for this year and 0.9% for next.