The Organization for Economic Cooperation and Development (OECD) has advised Spain to further broaden its corporate tax base, reduce the rate and withdraw special regimes for small and medium-sized enterprises (SMEs). In June this year the Spanish Cabinet approved reductions to corporate and individual income tax rates over 2015 and 2016 to boost investment and employment. According to OECD, these reductions are expected to have a cost in terms of revenue of around 0.6 percent of gross domestic product (GDP).
For Personal Income:
- reducing the number of brackets and rates.
- increasing tax benefits for large families and households with disabled members.
For Corporate Income:
- eliminating tax credits,
- reducing the standard corporate tax rates and
- eliminating the preferential rate for SMEs.
Overall, this reform goes in the right direction to boost labor supply and investment, the OECD says. It argues, however, that more could be done to prioritize employment, while maintaining a fair distribution of the tax burden.
