Myths and fallacies about taxes and our tax system

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• November 20, 2017
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Speaking of taxes is talking about distributive justice. Justice with capital letters. The one that respects the rights of the people, the one that ensures a dignified life for all. 

There is justice when citizens enjoy their rights. 

From the right to decent housing to education, health, social protection ... But to make it possible you have to pay taxes and redistribute the proceeds attending needs and respecting rights. 

You have to pay taxes because they are the main means of the State to obtain income. Not paying taxes weakens the State and prevents it from fulfilling its inescapable obligation to serve citizens.

The enemies of taxes (rich or with a vocation to be) claim that taxes are a burden, harmful, and must be reduced. False. Paying taxes is helping the country work. But there is to organize the system of taxes, taxation, which has to be fair, progressive and sufficient where everyone pays according to their economic capacity.

You have to pay taxes because people are social beings. We need each other and depend on each other. 

We are interdependent and we organize ourselves to help each other. The State is the way to organize the people of an area or territory to ensure that interdependence that requires the payment of taxes. 

Without taxes, there is no justice or dignified life. 

Taxes are the cost of living in society, of benefiting from living in society.

Tax myths

And at that point it is convenient to dismantle some tax fallacies. Like the need to cut social budgets because there is no money because of the crisis. False. There is money, but it is very disappointing and it benefits those who accumulate more and have to pay less taxes. That's why little is raised.

According to GESTHA, trade union of technicians of the Treasury,  the rich Spaniards hide about 140,000 million euros in tax havens . Millions that do not pay taxes; Imagine if they paid for them.

There is money, but a large part is in the shadow economy. According to the report of GESTHA,  Submerged economy adds and continues , it increased in the crisis 60,000 million euros to reach 24.6% of GDP. 

They are more than 250,000 million euros of hidden money. That Spanish submerged economy doubles the European average, because in the Europe of the 15 the submerged economy is 12% of GDP.

The rich Spaniards hide about 140,000 million euros in tax havens, according to GESTHA

Submerged economy is that of companies that do not officially exist, do not appear in any official register and do not pay taxes. They submerge precisely so as not to pay taxes or social contributions.

Another false tax myth is that lowering taxes favors the economy. The truth and documented is that lowering taxes (almost always to the rich, of course) favors only the rich. 

And even more false is that lowering taxes moves the rich to create jobs with the money they save by lowering taxes. No.  The money saved by the rich for not paying taxes is used to speculate with varied and twisted financial products in the global casino that the financial sector has become.

Myths and fallacies about taxes and our tax system - There was no more employment but less

That the money that the rich save for not paying taxes does not benefit ordinary people was shown by a journal as little suspicious of leftism as The Wall Street Journal. 

The US financial newspaper analyzed the period of the presidency of Bush son after lowering the tax to rich and very rich. The newspaper's conclusion was that that stage, when the rich paid less taxes, was the one with the lowest job creation in recent US history.

It is also false that if taxes were increased on the wealthy in Spain, they would go to another country. Difficult, because most of the surrounding countries have taxes higher than those of Spain.

In the same way it is false that the Spaniards pay too many taxes. 

So false is that the European Union has denounced that the tax reductions in Spain perpetrated since 1995 were not justified in any way and, moreover, are the cause of the large Spanish public deficit.

In reality, Spain has a lower tax burden than the average of the 19 eurozone states of which it is a part. 

Fiscal pressure is what is really collected in taxes, fees and other taxes compared to GDP. 

In Spain, the tax burden is 30% of GDP while the European average is almost 39% . Much difference. 

Precisely because of the lower tax collection, the Spanish public debt does not stop increasing and today it is something more than a trillion euros, which is equivalent to 100% of the GDP, the wealth created in a year.

In Spain the tax burden is 30% of GDP while the European average is almost 39%

There is no doubt that the Kingdom of Spain is a leader in tax fraud. 

The volume of its fraudulent submerged economy causes the State to stop paying 90,000 million euros a year in taxes, fees and social contributions, according to GESTHA.

To understand the state of Spanish and global taxation, we must remember the role of the so-called tax havens :  

territories where the banking secrecy and the anonymity of the owners of deposits and those who speculate financially are total and where very few taxes are paid or not paid. 

Secrecy, anonymity and non-payment of taxes (or ridiculous) turn tax havens into financial lairs that store a huge and obscene hidden wealth. 

And footstep for not paying the taxes that big companies, multinationals and big fortunes should. 

In addition to mafias, organized groups of criminals and terrorists who also hide their money in tax havens.

Being rich comes cheap in Spain

A Spanish fact suggestive of Spanish taxation is that 34 of the 35 large companies and Spanish multinational corporations, which are grouped in the Ibex 35 stock index, have almost nine hundred branches or subsidiaries in tax havens. 

Why not if it is to evade taxes? 

In addition, in Spain, as in almost the entire world, capital pays little or nothing in proportion to its great benefits at the same time as multinationals such as Amazon, Google,    Microsoft ,  Nike , Apple, eBay, McDonalds,  Inditex , Facebook ... and up to three hundred more evade systematically, when they do not evade smoothly and simply, the payment of hundreds of billions of taxes.

Another fiscal fallacy to dismantle is that the tax fraud of the self-employed is enormous. It is not true. The non-payment of taxes of self-employed, small and medium enterprises (evidently also illegal) barely adds up to 8% of the total tax fraud in Spain. Those who evade large amounts of taxes are the rich, the great fortunes and large companies that evade three quarters of the country's tax fraud.

The final result is a considerable and worrying fiscal insufficiency that causes that the general budgets are short, besides moving the State to borrow. 

This insufficiency is a consequence of the current unjust and regressive Spanish taxation that it spends on the basis of what is collected and not collected enough. 

But it should be exactly the other way round: prepare budgets and collect to meet the rights and needs of citizens, with special attention to the most disadvantaged. 

That means that the General State Budgets (PGE) must be sufficient, as well as progressive and fair.

Myths and fallacies about taxes and our tax system - That capital pays for work

A true fiscal reform has to suppress the favorable treatment to the rents of the capital that pay little for their accumulation of capital, financial movements and benefits. Or they do not pay. 

Why should income from capital be less taxed than labor income?

For capital to pay, a real tax reform must establish a Tax on Financial Transactions (ITF), heir of the Tobin Tax, proposed by the economist James Tobin in 1971 to discourage short-term speculation of certain financial assets.

Unfortunately, an ITF project for ten states of the European Union, which should be in force now, seems to have gone to hell after several years of goring the partridge in useless meetings of the Ecofin (ministers of economy and EU Treasury).

If confirmed bad fiscal news will have to start in Spain a sine die campaign for this country, as they already have Italy and France, establish a state ITF that, in addition to dissuading part of the speculation, collect a few billion euros to alleviate budget insufficiency.

Finally a real tax reform has to restore without tricks or tricks the taxes on Successions, Donations and Patrimony, disappeared in fact in some autonomous communities by graceful bonuses and exemptions granted by autonomous governments. 

Like the PP of the Community of Madrid, where they stop collecting almost 400 million euros annually for the de facto suppression of the Wealth Tax.

Another taxation is possible and necessary, but it requires a firm political will to give the tax system more progressive, give more weight to direct taxes versus indirect taxes and that capital pays taxes for its profitability as work pays for its income.

Finally, a real tax reform must include the reduction or elimination of incentives and deductions of corporation tax. And, of course, must assume the fiscal pressure that the countries of the eurozone. According to the latest Eurostat data on fiscal pressure in the EU, Spain has 34.6%, compared to 41.4% of the countries in the euro zone (of which we are part). 

In other words, if in Spain the fiscal pressure were that of the eurozone, it would raise 60,000 million euros more per year.

And, of course, a real tax reform would include more personnel and more means for the Tax Agency to end tax fraud, especially the big ones who do not even bother, do not get upset. 

But, above all, the principle of fiscal sufficiency must prevail: not spend according to the approved PGE but elaborate according to the needs and rights of citizens.

Fair, progressive and sufficient taxation is the best way to end inequality and fulfill the objectives and purposes of the citizens' welfare Constitution. 

But in the Kingdom of Spain it is very difficult because a reign of fiscal injustice and corruption has settled among us. 

Something will have to be done about it.