Spain central government, annoyed by Valencian Community tax cuts

The president of the Valencian Community (east), Ximo Puig, made the central government, chaired by Pedro Sanchez, uncomfortable on Tuesday with his announcement of a reduction in the autonomous section of IRPF (Income Tax) for next year.

Said reduction, if applied, would have retroactive effects to 1 January 2022 and would benefit income earners of up to 60,000 euros per year, that is, the vast majority of citizens of the Valencian community. The measure also extends the limit of all regional tax deductions (rentals, home renovations, births or adoptions of children...).

This decision is part of a regional tax reform plan that seeks to mitigate the effects of the enormous inflation that has hit the country.

The announcement has particularly upset the centre-left (PSOE-Podemos) central government, which has come out against the tax cuts, which are being demanded by the right-wing opposition parties (PP, Vox). 

The announcement of the Valencian community, whose government is headed by the social democrat Ximo Puig (PSPV-PSOE) greatly complicates the position of the central government before 2023, a year in which municipal and general elections will be held. Tax cuts to alleviate the situation of families seem to be called to become a strong electoral argument.

A difficult position

The announcement of the measures by Ximo Puig placed the central government chaired by Pedro Sanchez in a difficult position on Tuesday. After a meeting of the Council of Ministers, the government spokeswoman, Isabel Rodríguez, avoided clarifying whether the central government supports the decision of the Valencian leader.

Instead, Rodriguez called for a "responsible speech" from all regional governments on fiscal matters, because she - she said - every time cuts in public revenues are announced "there is a debate about what (expenses) to cut."

In Galicia (northwest), after the announcement of a 50% discount on Wealth Tax made last week, the regional government of the PP (right) also announced on Tuesday a new reduction in personal income tax (IRPF) on income of up to 35,000 euros per year, with retroactive effects from January 1, 2022, with which it is intended to mitigate the rise in inflation.