Spain’s Sanchez Tells Brussels He’ll Raise Billions in Taxes

(Bloomberg) -- Spain’s government intends to increase taxes by more than 20 billion euros ($22.5 billion) during the next several years if Socialist Pedro Sanchez secures the support he needs in Parliament to serve a second term as prime minister.

Sanchez sent his four-year economic plan to European Union officials late Tuesday night, forecasting a 2.2 percent increase in GDP this year and 1.9 percent next year. He also pledges to increase taxes by 5.7 billion euros in 2020, as he had previously laid out his 2019 budget. That proposal was rejected by Parliament earlier this year, triggering a snap election. Sanchez’s Socialists won the greatest number of parliamentary seats in Spain’s national ballot on Sunday and he looks set to cobble together enough support to govern again.

Spain’s Sanchez Tells Brussels He’ll Raise Billions in Taxes

The tax increase would be used to fund a boost to social spending and to narrow Spain’s budget deficit from the 2 percent Sanchez’s economists forecasts for 2019 to 1.1 percent in 2020.

Sanchez had to meet the EU deadline to submit his country’s economic plan to Brussels even though he is now acting prime minister. A Spanish government isn’t likely to be formed until after another round of elections in May to elect EU, regional and municipal representatives.

The economic proposal upholds pledges Sanchez made on the campaign trail to boost corporate and income taxes as well as launch a “digital tax” applied to online services. The revenue hikes would increase Spain’s tax-to-GDP ratio, which is low compared to other EU countries. Socialist lawmakers have been eyeing that ratio for years, seeing an increase as a potential source of additional revenue. The plan submitted to Brussels forecasts an increase to 37.3 percent of taxes-to-GDP in 2022 from 35.1 percent in 2019. The average in the euro area is 40.2 percent.

©2019 Bloomberg L.P.