Spain’s corporate tax take has tumbled by almost two thirds from pre-crisis levels as small businesses fail and a growing number of big corporations seek profits abroad to compensate for the prolonged downturn at home.
Attractive tax benefits can accrue to companies expanding overseas, but for prime minister Mariano Rajoy’s government, which now seems resigned to accepting a European financial rescue, the income flow is reversed.
Mr Rajoy has passed €65 billion of austerity measures including public sector wage cuts and consumer tax hikes but has been reluctant to lean on businesses that are key to maintaining jobs when one in four Spaniards is unemployed…
That the companies have continued posting profits at all is largely thanks to earnings abroad….
Not entirely clear how this is going to help narrow the Spanish deficit.