The Government rectifies its plan to end the help of joint taxation in personal income tax

 The Treasury clarifies that it will wait for the opinion of the tax reform experts after receiving criticism from the opposition against the measure included in the Recovery Plan

After the rain of criticism from the opposition and two days before the elections in Madrid, the Government is reconsidering its position on the elimination of tax aid to two million households that file a joint income tax return. A measure that the Executive included in the Recovery Plan sent to Brussels on Friday as “an equality policy to encourage the incorporation of women into work.”

Executive sources clarified this Sunday that they will wait for the experts' opinion on the tax reform and that what they will do is "evaluate the measure without increasing the tax burden on families."

The Executive maintains that the elimination of the tax benefit is not being considered. However, the document sent to the European Commission makes it clear: “The gradual disappearance of the reduction for joint taxation is included through the establishment of a transitional regime, because it generates a disincentive to the labor participation of the second recipient of the tax.” income (mainly women).”

This appears in Annex IV of the Recovery, Transformation and Resilience Plan dedicated to the analysis of gender equality aspects. This Saturday, when this newspaper contacted an official spokesperson to contrast the news, he only specified that the suppression would be "gradual" and that "there is consensus among experts that the measure discourages the entry of women into the labor market."

This reduction of 3,400 euros in the tax base currently benefits some four million individual taxpayers and represents a cost of 1,070 million euros for the public coffers, according to the calculation of tax benefits included in this year's State Budget.

After the criticism received this Sunday by the parties on the right and left of the Government, in the final stretch of the fierce campaign for the presidency of the Community of Madrid, La Moncloa specified that the measure “does not appear in the component dedicated to tax reforms of the Recovery Plan sent to Brussels.” This document contains the investments and reforms committed to be able to receive the 140,000 million euros of European aid. The Government has avoided publishing the full text, of more than 1,000 pages, sent to the Community Executive, and has only released a summary with hardly any details of the labor, pension and tax reform. Nor has he given any great explanations about the reforms, although he has detailed them to Brussels, under the argument that he has to agree on them with the social agents.

After the commotion caused by the news about the elimination of the tax benefit of joint taxation, the Executive explains the following: “What the Government will do, and this is expressly indicated in the section dedicated to tax reforms, is to evaluate the recommendations of the Tax Authority (Airef) and analyze the effectiveness and efficiency of current tax incentives. To this end, a group of experts has also been created that will issue its report in February 2022. It will be at that time that it will be considered which fiscal measures are most appropriate to adapt our tax system to the 21st century and promote growth and the creation of employment". That is to say, it does not categorically assure that it will not do so. In fact, it leaves the door open to ending this reduction that benefits couples who file jointly.

"The only thing the Government is going to study, with the technical advice of experts, is the way to prevent this tax reduction from accentuating the existing gender gap in the labor market, without in any case this possible tax reform going to imply an increase in the tax burden on families,” the Executive points out, although it is evident that if the aid is eliminated the tax burden on households will increase, unless it is compensated with additional aid.

The Executive remembers that the Tax Authority published a year ago an evaluation report of the main tax benefits (tax reductions, deductions and bonuses) of the Spanish tax system. This organization concluded that this aid met its objective, "although it creates a disincentive to the labor participation of the second income earner (mostly women), which accentuates the gender gap problems in the Spanish economy."

For this reason, the institution proposed to “accelerate its gradual disappearance by establishing a transitional regime so as not to harm families with less capacity to adapt their labor participation decisions to the new situation. “Offset the negative effect that the tax benefit will continue to have with new incentives for women's labor participation that reduce the gender gap.”

Currently, the reduction for joint taxation of personal income tax depends on the type of family unit in question. In general, it mainly benefits families where one of the spouses does not work or there is a great difference between the income of one recipient and the other.

Source: El País