Spain bites bullet to punish polluters with new environmental tax

SPAIN plans to raise an extra €500 million from environmental taxes as it struggles to meet the EU’s 2017 deficit target. It comes amid a broad swathe of budgetary changes in the new year that are expected to rake in €8 billion for the executive.

Adapting the corporate tax regime and launching additional levies on alcohol, tobacco, and soft drinks are among the highlights but tougher action on polluters has been a harder pill to swallow for Rajoy’s government, which has close ties to the hydrocarbon industry.

Despite going against the grain and punishing rather than rewarding people who use environmentally-friendly solar power, the PP-led government taxes pollution and energy production from damaging fossil fuels at a far lower rate than the EU average.

The European Commission has long pleaded with Spain to tax giant energy companies at a fair rate, especially as the country faces EU sanctions if it fails to bring the deficit down to 3.1% of GDP next year. 

At present the deficit stands at 4.6% GDP and, with one of the fastest growing economies across the Eurozone, Madrid is confident of meeting that target in 2017. 

The government has also pledged not to raise income or value-added taxes and will be looking for more innovative and devious ways of raising revenue without angering too many of its industrial allies.