The OECD left a long and complex list of duties to Spain. In the report on the situation of the national economy, presented yesterday by its chief economist, Clare Lombardelli, the body that groups the 40 most industrialized countries in the world considered insufficient the pension reform approved during the last legislature and proposed “new measures” to “guarantee the financial sustainability” of the public system. Three, specifically. First recommendation: the calculation period for benefits should be extended from 25 to 40 years, “at least”. Second: increase the legal retirement age in line with life expectancy. And third: tighten the requirements to access a pension (currently, with 15 years of contributions, half is collected, and the full amount is received at 37 years, which will be 38.5).
The OECD also recommended to Spain a battery of fiscal measures to increase revenues up to 10 billion, as Spain still maintains a tax-to-GDP ratio lower than the EU average. The organization asked to raise the VAT and eliminate the reduced rates, which “disproportionately benefit households with higher incomes”, he points out. He even proposed to the future executive to move towards a single and uniform rate in the coming years, while insisting on not extending the reductions in energy and food on January 1.
The organization also noted in the report that it would be possible to mobilize more tax revenue by raising excise taxes on alcohol and tobacco.
A third block of fiscal measures that the OECD called for an increase refers to environmental taxes. “Spain has considerable room to make the tax system more environmentally friendly”, he concluded. Specifically, the body cited the diesel rebate as one element that should disappear, as well as zero rates for fossil fuels used off-road (such as in commercial shipping, aviation and transport railway) and the particularly low rates for fuels used in industry, especially fishing.
In terms of tax cuts, the OECD recommended reducing capital and income taxes for low-income households with children.
Despite the list of recommendations, the OECD’s chief economist highlighted Spain’s “solid” economic growth yesterday in Madrid. The body raised the forecast for this year to 2.5% and lowered it to 1.5% for 2024.
Regarding the interprofessional minimum wage (SMI), the OECD decided in favor of moderating future increases so as not to harm youth employment. Likewise, he advocated for increasing the amount and scope of the minimum living income (IMV) and warned of the negative effect that, in his opinion, the application of the limits to housing rental prices in the tense market areas.
The OECD predicts that the public deficit will close this year at 3.8% of GDP and fall to 3.5% next year, while debt will exceed 109% in 2023 and reach 110% in 2024. Faced with this scenario, his approach was that “given the poor demographic prospects and the consequent spending pressures related to aging, as well as the need to spend more on the green transition, it would seem prudent to accelerate the pace of fiscal consolidation to restore pre-covid debt levels in a few years.”
