Pablo Hernandez de Cos: “A comprehensive review of the tax system and public spending is necessary”

The governor, who is a strong supporter of the need to design a fiscal consolidation plan that must be implemented now to get public finances under control, expects interest rates to continue to rise significantly in upcoming meetings. – The last meeting of the European Central Bank decided to raise interest rates by an additional half point. Where is the ceiling to stop increasing it, or a hairpin? – Interest rates will rise to levels that allow us to ensure that inflation returns to the 2% target in the medium term. What is this level? The current uncertainty is so high that it is not really possible to give precise guidance. But, with the information we have at the moment, to achieve this goal, we believe that it will be necessary to continue to raise interest rates significantly in the next meetings, and that once this is reached, we will have to maintain this “final” level. briefly. The most important message is that we are not at the end yet. – Is there a threat of non-payment in the bank? It is clear that higher interest rates lead to an increase in financing costs for households and companies, and as their income slows down and their real income decreases due to inflation, their ability to repay diminishes. However, the magnitude of the impact will depend on the depth of the economic slowdown, the persistence of inflation and the extent to which monetary policy must be tightened, among other factors. From a financial stability perspective, the related message is that our stress tests regularly show us that the overall solvency of the banking sector will remain at appropriate levels even in adverse scenarios, despite the heterogeneity between the entities. Let’s not forget that this resilience is largely due to the implementation of regulatory reforms on a global scale and, in the Spanish case, to the restructuring of the last decade. – Wouldn’t it make sense for banks to replace deposits again? – We note that deposit bonuses barely increased and that the transfer of money market price increases into household and corporate debt costs has become slower than it was in previous periods of increases. The first would be related to the fact that we initially started with negative rates that, to a large extent, were not transferred to deposits, as well as ample liquidity and high deposit-to-credit ratios in the banking system. But we do expect incrementally larger translations in both credit and deposit costs. Meanwhile, savers are already using alternative tools to improve the profitability of their savings. From monetary policy to fiscal policy. We now have three new taxes. For the great fortunes, of the Bank, and of the activists, what influence have they had on Spain? – We do not yet have an assessment of its impact. In any case, what I would like to stress about the tax system is that I believe there is a broad consensus on the need for a comprehensive review of it to improve its collection capacity and efficiency. It is also accompanied by a comprehensive review of public spending. These reviews are an essential part of the fiscal consolidation process that I referred to earlier. A comparison with the rest of the neighboring countries can serve as a guide. This comparison shows that Spain collects less on average than other countries. When we analyze why we collect less, it is not so much due to lower marginal rates as to the effect of discounts, bonuses, etc., which ultimately leads to lower average effective rates. And in terms of composition, Spain collects less, mainly excise taxes and environmental taxes. This diagnosis can be a good starting point for repair. Include, of course, redistribution criteria deemed appropriate. Finally, it is very important to bear in mind that, given the high degree of international integration of our economy, the collection capacity of certain tax figures is largely conditioned by the degree of fiscal coordination on an international scale. This is why the international tax agreements reached in the OECD/G-20 and in the European Union are so important in the case of corporate taxation and the taxation of digital activities. It is the only way to prevent certain taxes from creating competitive disadvantages that end up negatively affecting growth and achievement.

See also  Doubts about Spain's public accounts overshadowed a major meeting of foreign investors

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button