Government to increase social spending and introduce tax reforms to obtain CUP’s support to the budget

The budget for 2017 is one of the main hurdles between the Catalan Government and radical left pro-independence CUP. After the latter refused to pass the bill last June, which led to the vote of confidence promoted by Catalan President, Carles Puigdemont, the pro-independence forces in the Parliament are now negotiating the so called Accompaniment Law for the 2017 budget. One of the main warhorses is related to the reform of income tax. CUP aimed to increase income tax for those who earn more than 60,000, but this proposal is not apparently on the table. On the other hand, the Government offered to eliminate tax relief for property purchased for those who earn more than 30,000 euros per year. By applying this modification the Government could collect 11 MEUR in 2018, negotiators estimate.

The reform of income tax has been one of the main points of disagreement between governing cross-party ‘Junts Pel Sí’ and CUP. In this regard, the Catalan executive plans to eliminate tax relief for property purchase for those who earn more than 30,000 euros per year. This point will have to be passed by CUP’s National Board on Saturday but the pro-independence party’s members have already admitted that they are keen on the proposal. CUP’s aim, however, went a bit further since they bid for increasing income tax on those who earn more than 60,000, but this proposal is not apparently on the table.

Taxing property speculation
The draft is set to include tax reforms as well as the introduction of new taxes especially oriented toward avoiding property speculation. Amongst these, the document which CUP’s National Board will have to put to vote this Saturday, foresees the increase of tax on property transfers which are worth more than 1 MEUR. This will allow the Government to collect 27 MEUR more in 2018. The draft also foresees the creation of a new tax on non-productive assets which will affect legal entities which have properties and vehicles which are not used for any economic activity.

The Government and CUP also plan to tax negative externalities, those economic actions which could have a negative effect on citizens’ welfare or the environment. Thus, there will be a tax on sweetened beverages, which will represent an additional 40 MEUR and the tourist tax will be modified in order to tax all cruise passengers, regardless of the length of their stay.

More social spending
The Catalan Ministry for Economy and CUP have also agreed on increasing social expenditure by 989 MEUR in comparison to the amount allocated for this purpose in 2015. 391 MEUR will be allocated to education, 407 MEUR to the Health System and 191 MEUR to the Work and Social Affairs Department. Thus, the amount assigned to social expenses for 2017-2018 totals 24.4 billion euro which represents nearly one million more than in 2015 and 611 million more than in the last bill, rejected by CUP last June.

Looking for CUP’s support
Although the document has been negotiated between ‘Junts Pel Sí’ and CUP, the latter will have to put the document to vote amongst its members during this Saturday’s National Board meeting. In this sense, CUP warned that passing the Accompaniment Law ‘doesn’t imply’ backing the budget, which will have to be put to vote again by the beginning of next year. Indeed, CUP noted that they will emphasise in all of their statements that the budget is not theirs and that in the event that the budget will arrive in the Parliament, it will only be passed with 2 votes in favour and the abstention of the other 8 CUP MPs.