The Andalusian government is confident that the tax cut will reactivate the economy and that tax revenue will not be affected.
The application of part of the fiscal measures contained in the future Law on Assigned Taxes of the Andalusian Autonomous Community, presented yesterday in Parliament, will not have to wait for the entry into force of the law, scheduled for January next year. On Tuesday, the Governing Council approved a decree law bringing forward the reductions to the reduction in the tax on Transfer Tax and Stamp Duty, which is expected to have 275,000 beneficiaries.
This has been done, as explained by the Minister of the Presidency, Elías Bendodo, to prevent the announcement of a reduction that will benefit buyers from paralysing the real estate market in the remaining months until the law comes into force. The decree, which will be repealed with the approval of the law, consists of a reduction in the general tax rate applicable to the transfer of real estate and that applied to notarial documents. For the transfer of a property valued at 180,000 euros between two private individuals, the saving resulting from this reduction will be 1,800 euros. The measure pursues the dual objective of boosting the reactivation of the real estate sector by reducing the taxation linked to the purchase of second-hand homes and, on the other hand, to encourage the supply of new construction at more affordable prices by reducing tax costs.
The implementation of this measure will, according to the forecasts of the Junta, stimulate the property purchase market, attract new investors and encourage consumption. All of this, according to the forecasts of the Junta, will have an impact on higher tax collection in other tax modalities such as personal income tax by generating more economic activity and VAT, by increasing expenditure on investment goods related to property acquisitions.
As reflected in the economic impact report that accompanies the bill presented separately but in identical documents by the PP and Ciudadanos on the one hand and the PP and Vox on the other, the expected loss in revenue from this tax reduction is estimated at 254 million euros, an amount that the Junta not only hopes to compensate by the means described above but also to turn it into a favourable balance for the public coffers. According to the vice-president, Juan Marín, the experience of previous tax reductions promoted by the Andalusian government shows that each euro of tax reduction generates between two and three euros of economic growth. For this reason, according to Marín, it is not expected that the package of tax cuts will translate into cuts in public spending.
This is the logic reflected in the law's economic impact report, which estimates the direct loss of revenue from the measures adopted at 329 million euros. The regional government argues that this potential reduction will not really translate into revenue, as the measures will act as an incentive for the economy and will end up generating more revenue through an increase in the number of taxpayers and investment.
Thus, it is explained that the reduction in revenue from deductions to the regional section of personal income tax included in the new law will mean a reduction of 31 million euros, an amount that can be offset by a widening of the tax bases and the taxation in Andalusia of a greater number of taxpayers, as occurred with the reform of 2019, according to the text. 'With this set of measures, it is estimated that not only will tax revenue be lost, but also increased,' it states.
The same is assured in relation to the reductions introduced in the Inheritance and Gift Tax, which are also estimated to cost 31 million euros, which will be compensated, according to the proponents, with the attraction to Andalusia of a greater number of taxpayers and lucrative operations.
