Spain shoots up the wealth disparity charts

There has always been a sizeable gap between rich and poor in Spain, but that gap has now become a chasm. Fueled by the crisis and unemployment, Spain has shot to the top of the wealth disparity charts.

The so-called Gini coefficient, which measures a nation's income differential, is a clear indication of this change. If a country scores zero on the scale, it enjoys perfect income harmony; 100 would be complete disparity. Spain received a 34 on its report card, the second-highest score among the 16 EU countries that have so far handed in their data for this year. Only Lithuania, with 35.2, exceeded Spain.

But the Gini is not the only statistic that shows Spain's ill-balanced wealth spread. Eurostat's so-called 80/20 ratio is a gauge of the relation between the 20 percent who earn most and the 20 percent who earn least. In this data Spain broke the record with a 7.5, the highest figure in the EU.

IMF fears Spain’s risk premium may rise to 750 basis points

IMF officials on Tuesday raised concerns about the chance of a renewed spike in Spain and Italy's risk premium if their governments do not trigger intervention by the European Central Bank.

"The issue here is why the yields on Italian and Spanish bonds have come down," the IMF's Chief Economist Olivier Blanchard said during a press conference held in Tokyo on Tuesday. Blanchard suggested that this may have happened because investors are anticipating that their governments would request assistance from the European rescue funds. "If this is the case, we cannot be sure that the yields will remain low," he said.

The director of the IMF's monetary and capital markets department, José Viñals, a former deputy governor of the Bank of Spain, on Tuesday presented a report suggesting Spain's risk premium could hit 750 basis points if the European authorities do not take the right decisions on time.

Spain's risk premium was up 11 basis points from Monday's close at 434 on Tuesday after the IMF revised its estimate for the contraction in the Spanish economy this year by 0.1 points to 1.3 percent, almost triple the government's figure of 0.5 percent. It also predicted Spain would miss its deficit-reduction targets for this year and the next, and forecast the average jobless rate would rise to 25.1 percent when the government expects it to fall.

Labor Minister Fátima Báñez insisted the government's economic forecasts are "credible" and that the economy could start creating jobs at the end of next year.

FISCAL CHANGES FROM SEPTEMBER 1st

FISCAL CHANGES FROM SEPTEMBER 1st
IVA RATES UPDATED

Form September 1st. All the IVA rates are going to be as follows:

GENERAL                  18% -> 21%
REDUCED                  8%   -> 10%
SUPER REDUCED                 4%  no changed

Some of the activies that were included on the reduced level and will be now on the normal level are:

• Hairdresser:(Only big brands, not little businesses).
  
• Spectacles:Cinema, Theatre,Circus..
• Disco and dancing rooms
• Gym
• Funeral and decease services 
• Exhibitions
• Some health assistance services

INCOME TAX REFUND DEADLINE

In case you are fiscal resident in Spain and one of the taxpayers who is able to get a refund from his Annual Income tax, you need to know that in order to get that money back in your bank account, the Spanish Tax Office has 6 months from the last day of the tax declaration period (2nd July this year) in order to refund the money to the citizens.

If you are lucky you may not have to wait until 2013 to get the money, but you should know that in case the Tax Office has not pay you the money back, from that 6 months period on, they will pay you interest over the amount you have to receive. (Now the interest rate is set at 5%).

In case you need to check the status of your refund during the year, visit us and we will glad to offer you our services.

GOVERNMENT UNVEILS AUSTERITY PACKAGE

The Cabinet on Friday approved 27.3 billion euros of savings for the rest of the year — the biggest austerity package seen in Spain’s modern democracy — with the hopes that the country will stay on track to meet its deficit-reduction goal for the end of 2012 and avoid the same bailout fate that was suffered by Greece, Ireland and Portugal.

Speaking after a meeting of the Cabinet, Finance Minister Cristóbal Montoro described the country’s finances as “critical,” and reiterated that the government’s aim is to bring down the deficit by the end of the year from the current 8.51 percent of GDP to 5.3 percent, in line with Brussels’ demands.

“Spain will keep its good faith by ending the year with a solid deficit figure, as we pledged \[to Brussels\],” Montoro said.

The government plans drastic cuts in all the ministries with an average reduction of 16.9 percent of spending — two percentage points higher than the figure Prime Minister Mariano Rajoy cited on Tuesday. In all, 17.8 billion euros will be slashed from the central government’s expenditures.

The biggest cuts will be made in overseas aid through international cooperation and development programs, with 594 million euros of cuts.

The Cabinet also approved hiking taxes on big businesses and increasing court and other legal fees as new sources of projected revenue. The government hopes to rake in some 12.3 billion euros by eliminating corporate tax deductions, including suppressing a controversial goodwill tax break that made it easier for Spanish companies to purchase foreign firms and expand overseas.

Deputy Prime Minister Soraya Sáenz de Santamaría ruled out new taxes, including another hike in value-added tax (VAT), which was increased in 2010 from 16 percent to 18 percent.

“We are in a desperate situation when it comes to the fiscal outlook,” Sáenz de Santamaría told a news conference after the Cabinet meeting. “We are looking to turn the situation around as well as laying the foundations for growth and job creation.”

Montoro also announced that Spaniards who have overseas accounts to avoid paying taxes or currently have domestic earnings being paid under the table will be given a chance to regularize their finances by paying a 10-percent fee on the revenue declared, without any other fines or sanctions. The finance chief said he hopes to bring in another 25 billion euros with this amnesty.

The Cabinet also approved a seven-percent hike in electricity rates, and a five-percent hike in gas rates beginning Sunday.

The government’s plans will go to parliament on Tuesday, and are expected to be formally passed in June.

Spain’s new financial goals come as European finance and economy ministers, meeting in Copenhagen Friday, agreed to create a permanent bailout fund for the euro zone with a temporary lending capacity of about 700 billion euros for member states.

Economy Minister Luis de Guindos, who was in Denmark for the meeting, said that “Spain will no longer be a problem for the Union” as he presented his colleagues with the Spanish budget plans.

The budget was presented months later than usual given that the Popular Party took office in December.

Source: ELPAIS

FASTER OPENING LICENCES

Government is planning to cancel the obligation of applying for an opening licence for small businesses from June 2012 on.

Once the measure is approved, a person who wants to open a small business only will need to do 3 steps, avoiding between 6 and 18 months of delays on the obtention of the final licence.

This measure will be applied only for businesses like small stores, butchers, bakers...and it is important to have the requeriments needed:

• Premises smaller than 300 square meters.
• Annual takings lower than 50 million euros.
  
• Having less than 250 workers.

The negative point is that the measure will not be applied to bars, restaurants, hotels and companies which manage dangerous materials.

The process is the following:

• Presenting a technical report produced by an engineer or technician where it is shown that the business has the requirements.
  
  
• Presenting a document called Declaración Responsable. With that document, the manager is saying that his business has the requeriments needed to run the kind of business presented.

• The fees for the townhall have to be paid. Each townhall has different fees depending on the kind of business.
  

Then once the 3 steps are done, the business can be opened while you are waiting for the final resolution,until that moment, the administration can start inspections in order to check that there are no illegal features in the business. In case of detecting something illegal, the townhall could fine the business and stop or cancel the final licence process.

So this process is like Self-Licencing, because is the company who is declaring that the business has everything right and then the townhall can check it in future. At the moment, many businesses are working without the final resolution approved, because lot of people cannot wait many months or more than a year until they get the licence to open.

Activities Unit to control the businesses licences

The Department of Planning has decreed the creation of the Unit Activities, which has set up human and material resources. Specifically, two civil servants of town hall are part of that Brigade focused over the census of activities and supervising the holding of licenses and payment of fees. This unit will be authorized to visit and check establishments. As material resources will be provided with a vehicle attached to this unit and protocols.

Officials visiting establishments will be identified and credited as officers of the City of Orihuela and never ask for payment of any amount. The guideline is as follows: the unit visits the facility and is identified and requires you to show them the license or the license application and payment of fees. Then they will record your business in a census data and specify the activity data (if is licensed and if fees have been paid). If everything is correct, the establishment becomes final census.

If you only have the application then will be required to pass through the activities department to drive the process and finally obtain the final license and remedy deficiencies for finally obtaining the license. If it is not licensed, disciplinary proceedings will be opened and you will be prompted to initiate the procedures that apply.

"The penalties can range from suspension of activity, from fines to closure of the establishment," said the Town Planning, who has insisted that the goal of creation is to enforce the law, since the City must monitor that all activities are conducted under the rules of safety.

New Non Resident percentage. Fiscal changes (I)

With the new year, some fiscal changes have arrived within. One of the most important for many of our clients is the update over the Non Resident tax.

From the 1st of January 2012 until the 31st of december 2013 (both included), the new general rate will be 24,75%. This percentage has been increased from the previous 24%.

This tax could affect you for example if you are non fiscal resident but have a house in Spain. When you will be declaring your annual non resident tax from 2012 it will be slightly higher.

In case you have premises in Spain and are Non Resident, your tenant will be also holding each month the 24,75% instead the 24%.

MERRY CHRISTMAS AND HAPPY 2012!

Un año más, desde VP ADVISERS queremos desearles una
Feliz Navidad y un Próspero Año Nuevo.
Que sus mejores deseos se cumplan en 2012.

Another year, from VP ADVISERS we want to wish you a
Merry Christmas and a Happy New Year.
We hope your best wishes will come true.

NEW GOVERNMENT DECISSIONS

Prime Minister-elect Mariano Rajoy announced yesterday that he will freeze public-sector jobs, move all public holidays to Mondays, stop early retirements and cut the deficit by 16.5 billion euros as part of his grand plan to move Spain out of its deep economic crisis.

These are some of the biggest pledges the Popular Party (PP) leader made for the next four years during his investiture speech, which was delivered to Congress on Monday morning.

The only increase in spending, he said, would be in pensions, which will be brought up to date with the consumer price index from January 1.

The future prime minister, who has kept the plans of his incoming government close to his chest since winning the general elections on November 20, predicted that Spain's exit from the crisis would be guaranteed by the cuts, as well as by fulfilling the country's commitments to Europe. The austerity drive introduced by the outgoing government of José Luis Rodríguez Zapatero involved savings of just 10 billion euros.

"I am willing to hear proposals from everybody but I think that the priorities should be to concentrate on economic growth and job creation," Rajoy said.

Socialist leader Alfredo Pérez Rubalcaba warned that the new PP government would be making drastic cuts in the public welfare system and social policies.

"So when are we going to get the bad news?" Rubalcaba said during the debate. The Socialist leader accused Rajoy of "knowing where the cuts" will be made but declining for now to say where.

Rajoy has made cutting the country's public deficit one of the main pillars of his mandate. He said the country may miss its target of cutting the shortfall to 6 percent of GDP this year from 9.3 percent last year, but insisted the goal of reducing it to 4.4 percent of GDP next year would be met.

In his 84-minute speech to Congress, Rajoy said he would carry out state reforms to avoid duplications, reduce costs and improve efficiency. This will include a freeze on all public-sector jobs except for those in "state security forces and basic public services."

Rajoy also pledged not to raise taxes at the current time. But he said he would reform the manner in which small businesses and the self-employed pay value-added tax (VAT).

Source: EL PAIS