GO
Loading...

Spain Announces Tax Hikes to Combat Economic Slump

John Lamb | Photodisc | Getty Images

Spain announced tax hikes on alcohol, tobacco and some fuel, and limitations on corporate tax deductions on Friday, as part of the government's battle to raise public revenue hit by an economic slump.

The tax measures are worth increased revenue of 1 billion euros ($1.30 billion) this year, Treasury Minister Cristobal Montoro said at the government's weekly news conference.

The measures include a 10 percent rise on the existing alcohol tax, which does not affect wine or beer. The higher alcohol tax and a rise in the tax on tobacco will mean increased revenue of 700 million euros a year, the minister said.

(Read more: IMF: Spain's 'Hard Won' Solvency Needs Protection)

Montoro said the government would limit corporate tax deductions on losses in foreign operations or investment portfolios. The change to the tax rules on losses in companies' investment portfolios would mean 3.65 billion euros in revenue per year, he said.

A higher tax on fluorinated gases, used in refrigeration and air conditioning, would mean 700 million euros in additional revenue per year, he said.

Spain's tax revenue has been battered by a five-year off-and-on recession after a decade-long property bubble burst left the country with one of the highest public deficits in the euro zone.

(Read more: German Companies Sip From Pool of Spain's Young Jobless)

The previous and current governments have focused mostly on spending cuts to balance the books.

The government also slightly raised its GDP growth forecasts for 2015 and 2016 and cut ministry spending for next year.

Contact Europe News

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    › Learn More

Europe Video

  • A yes vote in the upcoming Scottish independence referendum could lead some insurers to move their headquarters to London, says Mark Nicholson, associate director at Standard & Poor's Rating Services.

  • The U.S. Federal Reserve remains data dependent and will not bow to hawks, says Mark Haefele, global chief investment officer at UBS, as Janet Yellen continues to make the argument that there is slack in the labor market.

  • European shares closed lower on Friday as tensions in Ukraine flared up once again. It comes after stocks fluctuated as U.S. Federal Reserve Chair Janet Yellen spoke about the labor market in Jackson Hole, Wyoming.