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Spain’s government plans temporary higher tax rate for richest 1%

President of Spain Pedro Sanchez has announced plans to increase tax rates on the richest 1% (Jason DeCrow/AP)
President of Spain Pedro Sanchez has announced plans to increase tax rates on the richest 1% (Jason DeCrow/AP)

Spain’s Socialist-led coalition government is planning a temporary higher tax rate on the richest 1% of the country from next year, in addition to its windfall taxes on large energy companies and banks.

“We are proposing a redistribution of the effort, among those who have the most, to fund the welfare state, which is everybody’s,” Socialist Prime Minister Pedro Sanchez said in a speech on Friday.

Finance Minister Maria Jesus Montero said the measure targets only millionaires.

The expected increase in tax revenue will be used to alleviate hardship brought by higher prices for energy and food, she said. The annual inflation rate climbed to 10.5% in Spain last month.

The exact increase and scope of the tax measure are still being worked out, the government said.

The Socialists’ junior coalition partner, Unidas Podemos (United We Can), is pushing for the new tax to be permanent.

The current top rate of income tax, for those earning more than 300,000 euros (£265,000) a year, is 47%. The highest capital gains tax is 26%.

However, regional governments have some leeway on taxation, and some of them run by the conservative Popular Party — the country’s main opposition party — have been cutting taxes, saying that step will spur growth.

A debate and vote by lawmakers on the government’s proposed windfall tax on companies is expected in the coming weeks.