BOLSTERING GROWTH:SPAIN LOWERED taxes on new home purchases while approving cuts to health spending in a bid to convince investors the country can bolster economic growth and reduce its budget deficit.
Value-added tax on purchases of new homes will be cut to 4 per cent from 8 per cent until the end of the year, said development minister Jose Blanco, whose ministry estimates there are 700,000 unsold homes left over from the housing boom.
The cabinet also passed a decree to bring forward corporate tax payments, worth €2.5 billion this year.
It will also stop doctors from prescribing brand drugs in a bid to save an annual €2.4 billion in health-care spending, Mr Blanco told reporters in Madrid yesterday.
The Socialist government, which faces early elections on November 20th that polls indicate it will lose, is making the additional budget cuts as the European Central Bank buys Spanish and Italian debt to stem the sovereign-debt crisis.
Spain has already reduced wages, frozen pensions and raised sales taxes in an austerity programme that is undermining the economic recovery, and is now turning to companies to bolster the public coffers.
“They don’t want to engineer another recession through the fiscal adjustment,” said Jan Randolph, head of sovereign risk at IHS Global Insight in London. “It is an extremely difficult balancing act.”
Finance minister Elena Salgado told reporters the reduction in tax on purchases of new homes would stimulate business and help work through the stock of unsold homes – a legacy of the decade-long housing boom that left Spain with one of the highest private-debt burdens in the euro region. – (Bloomberg)
