Spain to tax top earners, cut gov't payroll to battle deficit

Updated 33m ago |
By Ciaran Giles, Associated Press Writer

MADRID — Spain will introduce a new tax for the country's highest-income earners in the next few weeks, part of a wider effort to raise money and cut a swollen deficit, Prime Minister Jose Luis Rodriguez Zapatero said Wednesday.

Zapatero said the tax "will not affect 99.9% of Spaniards" but he gave no more details.

His Socialist government recently approved public sector wage cuts and other spending reductions in a bid to save 15 billion euro this year and next to bring Spain's deficit down and calm jittery markets.

The prime minister has said his own salary and those of other senior members of the government will be cut by 15%.

On Tuesday, lawmakers in both chambers of Parliament agreed to cut their base salaries by 10%. Municipal governments announced pay cuts of as much as 15% for mayors and other local elected officials.

The cutback package is expected to be approved by Parliament on Thursday.

Zapatero first mentioned the new tax for the high-wage earners last week in an effort to stave off criticism that low income earners were being targeted by the cutbacks, but he has so far failed to give any specifics beyond saying it will be a temporary measure.

Over the course of the economic crisis, Zapatero has announced reforms on issues such as retirement ages and pensions or taxes on the wealthy only to withdraw them in a matter of days or even hours, triggering accusations of incompetence.

On Wednesday, Zapatero defended himself saying the severity of the crisis was obliging all countries to make decisions rapidly that sometimes needed to be adjusted afterward.

Spain is coming under increasing pressure to introduce labor market, fiscal and banking reforms to cut its large deficit from 11.2% of gross domestic product in 2009 to within the EU limit of 3% by 2013.

Europe's top job creator two years ago, Spain now has the region's highest unemployment rate at just over 20% and is the slowest of the major economies to emerge from the recession.

http://www.usatoday.com/money/world/201 ... ntax_N.htm