Spain has tried different ways to enhance their fiscal policies in the past

years and they have been focusing on their fundamentals that is why they haven’t
suffered as much as their neighbors in Europe. (Posen) It is evident in the different
periods how much they change in order to get the right procedures to keep their
economy at a high.

Since 1964, there have been five different periods associated to the public
finances of Spain. The first period was from 1964 until 1975 when economic
expansion was strong. There was a steady growth in the government’s revenues
and expenditure because there was a small budget surplus and an average real
GDP growth of 6.4%. But after the first period there was a sudden shift because in
the second period during 1975-1985, there was political change and an economic
crisis during 1976 which caused a budget deficit which grew continuously. In order
to slowdown this rising deficit, the Spanish government made an aggressive move
to focus on tax reform. Because of the fiscal reform of 1977, there was an increase
in public revenue thus but the rate was lower than that of Spain’s expenditure. Due
to this imbalance, public debt had a significant increase from 12.1% to 43.7% in six
years. (Castro and Páramo)

During the third period which was from 1986-1988, Spain was acceded into
the European Community and there was a change in fiscal policies. There was a
reduction in the budget deficit during this period due to growth in government
revenue. In the period of 1989-1993, there was a deficit sometime in 1990 after the
period of 1986-1988 which was a fruitful period for Spain. In terms of public revenue
during this period, there was a significant increase in the GDP sometime in 1993.
Accompanying the growth in GDP was also a slight increase in the country’s public
debt. Due to the commitment to the convergence criteria, the fiscal policy of Spain
was constrained so that they would be acceded into the EU. During the 1994-1998
period, Spain found ways to end the tendency of imbalanced public finances and
reduction of their deficit. But in 1995, they weren’t able to control this thus
increasing their deficit once again. Because of a decrease in their spending, Spain
was able to bring their deficit back to a tolerable level while sacrificing the general
government revenue in doing so. (Castro and Páramo)

The current fiscal policy of Spain as of February 2010 has a goal of increasing
the tax pressure on companies and individuals. These mainly focus on the Value-
Added Tax(VAT) increase from 16% to 18% and the EU regulations on VAT will be
implemented. Apart from the VAT, there will also be an increase in the Capital gains
tax and transfer tax. The Spanish fiscal policy also gives premium to SME and self
employed by giving them a 5% temporary tax decrease in order to help them earn
and eventually expand to become a bigger company or manufacturer. (Lawyers)

As we have seen in the history of the fiscal policies of Spain, the government
has always tried to keep their percentages in terms of their deficits at a low and
their revenue percentages at a high. In order to keep this balance, the government
finds ways to cut down on expenses such as investments in infrastructure and
wages for those in public administration.

These efforts of Spain has made them cut their deficits faster than the other
countries such as Greece, Ireland and Portugal and with that being said, they are
giving their investors an assurance that they are willing to do everything to get
themselves out of that deficit. This so that they would be able to comply to the
Stability and Growth Pact and achieve their goal of reducing their deficit before
2012 because of the council’s decision in April 2009 that they have to comply to.

Works Cited
Castro, Francisco de and José Manuel González Páramo. "Evaluating the Dynamics
of Fiscal Policy in Spain." 2001.

Lawyers, Velasco. Spain Fiscal reform 2010, new changes in taxation. 16 February
2010. 10 Ferbuary 2011 <http://www.velascolawyers.com/en/articles-and-
publications/fiscal-law-and-taxes/90-fiscal-reform-in-2010-new-changes-in-
taxation.html>.

Posen, Adam. "One Fiscal Size Does Not Fit All – a Korean lesson for Spain." 25 June
2010. Eurointelligence. 10 Febuary 2011
<http://www.eurointelligence.com/index.php?
id=581&tx_ttnews[tt_news]=2835&tx_ttnews[backPid]=901&cHash=064f3bd1a7>.