Spanish fiscal support measures: Boosting corporate liquidity in response to COVID-19

Spanish fiscal support measures: Boosting corporate liquidity in response to COVID-19

Fecha: mayo 2020

Desiderio Romero-Jordán and José Félix Sanz-Sanz

Aplazamiento fiscal, COVID-19, Liquidez empresaria, Medidas fiscales

SEFO, Spanish and International Economic & Financial Outlook, V. 9 N.º 3

Although the Spanish government has introduced significant deferrals of state taxes and social security contributions, the scale and reach of these deferrals is smaller relative to some other EU-15 countries. Consequently, the government could consider expanding its commitments to provide a stronger foundation for Spain’s future economic recovery.

Abstract: Current forecasts for the Spanish economy suggest that the COVID-19 pandemic will result in an economic contraction of between approximately 7% and 13% in 2020. Faced with that scenario, the government has passed a raft of employment, fiscal and financial measures to mitigate the destruction of jobs and businesses. One of the most significant initiatives is the deferred payment of state taxes and social security contributions by six months. That deferral option is longer than the two to four months granted in some other European countries. However, the scale and reach of the initiative in Spain are significantly smaller than its equivalent in Germany, France, Italy, Denmark and Belgium, for example. In addition, these countries have offered direct grants or subsidies to firms, not just tax deferrals. One of the reasons for that difference is the fact that in Spain, taxes can only be deferred by companies with revenue of less than six million euros in 2019. For this reason, the government may want to consider a more decisive commitment to prop up corporate liquidity and pre-empt job losses. While this would inevitably result in a higher deficit over the short-term, it could pay off in the longrun by providing the economy with a stronger foundation upon which to stage a recovery after the health crisis has abated.

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