Spain’s State Budget for next year has finally been agreed upon after Spain’s President, Pedro Sánchez and the leader of the left-wing Podemos, Pablo Inglesias shook hands on the details after weeks of furious debates.
Inglesias’ support is crucial for the President to be able to get the budget through Parliament, as he only has 84 seats out of 351, a compromise had to be reached for this to go though and become law.
This is what Spain’s residents can expect from the 2019 budget in January.
MINIMUM WAGE TO RISE TO €900
Sánchez and Iglesias have agreed to raise it €900 from the start of 2019 – with a double salary at Christmas and in August. Minimum wages are referred to in 14-month years, so for the majority who earn 12 monthly salaries a year, this means they cannot be paid less than €1,0505, or the pro-rata equivalent if they work part time.
It is not clear if this figure is gross or net, but on a before-tax wage of €900 a month in 14 payments or €1,050 in 12, based upon an unmarried adult with no dependants and not registered disabled, the monthly take-home would be €964.50 in 12 payments or €884 in 14.
It was noted that Podemos wanted the minimum-wage to be €1,000 and the aim is to work towards this for 2020.
INCREASED PROTECTION FOR TENANTS AND LOCAL CAP ON RENT RISES.
Landlords will be unable to charge more than 2 months rental up-front as a deposit, the minimum long-term rental will rise from 3 to 5 years – automatically renewable for another 3 years, rather than the 1 that is now, unless either party has expressed their wish to end the tenancy. Town Halls are to keep an eye on excessive increases in rent prices across the board.
They will also have the power to order property owners to decrease the rent they are asking for if it is considered to be ‘abusively high’.
No guarantor’s signature or additional bank guarantees, may be requested upon drawing up a rental contract; landlords are only permitted to charge a deposit.
Progressive rises in State funding for housing has been agreed with €630 million in 2019, €700 million in 2020 and €1 billion in 2021, aiming to invest between 1% and 1.5% of the GDP in 10 years.
PUSHING FORWARD GUARANTEED FREE NURSERY PLACES FOR UNDER-THREE’S.
The Government will allow town councils to invest part of their budget surpluses in funding nursery places for children from birth to three years old, Sánchez and Inglesias calculate that this will mean around €300 million a year being freed up for the purpose.
Research has long established the fact that nursery education improves academic performance as it gives children a head start, as well as the obvious benefit of allowing parents of pre-schoolers to work.
Spain has also been concerned about the school drop-out rate with children leaving school at 16 with poor grades/no qualifications, so this is part of the strategy to combat the problem.
Councils that do not have a budget surplus will be given grants to help make nursery places free and €30million will be set aside in the State budget to fund these.
At the other end of the education spectrum, the 2019 budget will slash university tuition fees and increase the availability of student grants.
INCREASED INCOME TAX FOR THOSE EARNING €130,000 OR MORE A YEAR.
Podemos sought to raise the income tax bracket for incomes exceeding €120,000 and Pedro Sánchez’s party wanted €140,000 so they met at the figure of €130,000.
The exact figures and additional percentages are likely to be in the region of 2% more from €130,000 a year, rising to an extra 4% for those earning €300,000.
This will mean that, for example, a person earning €200,000 per year will see his/her tax rise by €1,100 in total.
Also, a tax on assets for ultra-high net-worth, or persons whose wealth exceeds €10million, will rise by another 1%.
In a bid to continue the fight against money-laundering, the ruling Government have agreed that payments in cash between professionals in the course of their business – currently at €2,500 will now be limited to €1,000.
This does not affect individuals, with private sales of goods or gifts from parents to children a cash limit of €2,500 will remain.
TAX ON DIESEL CARS TO BE INCREASED.
By the year 2020, the government expects its ‘green car’ plan to have an extra 30% in the pot, so an increased tax on diesel, which is harmful to the environment, will help to fund those who wish to buy electrically powered vehicles.
This does not mean the tax on diesel going up by 30%, at least not yet, diesel will rise to the same level of petrol, so the advantage of buying a diesel car to save money, will be over. Also, the tax element of the cost per litre may become a larger proportion.
Increasing production of renewable energy at the cost of fossil-fuels and nuclear sources are among the wider intentions in the budget plan, with lower bills and prices included across the board.
If you have trouble keeping warm during the winter, a State-wide residential property renovation plan from next year, costing upwards or €400million, will fund up to 20% of any works on homes to improve energy efficiency.
WORKING TOWARDS MATERNITY & PATERNITY LEAVE BEING EQUAL AND NON-TRANSFERRABLE.
Although maternity leave is currently at 16 weeks and paternity leave, which only just doubled this year, at 4 weeks, it will increase again next year to 8.
From the start of 2020, dads will get 12 weeks’ leave, and by the 2021 will have the same as their partners at 16 weeks.
Employees already get 100% of their salary during maternity and paternity leave but there are no plans as yet for the self-employed, who currently earn €600 a month for maternity/paternity leave.
Although, as yet, it is not clear whether paternity and maternity leave can run concurrently, overlap or follow each other, parents will not be able to ‘pass on’ their leave to each other so one gets 32 weeks and the other does not.
EMPLOYEES AND THE SELF-EMPLOYED.
Sánchez’s government plan to axe the ‘more harmful’ aspects of the 2012 labour reform, union negotiation and collective bargaining will no longer be restricted, working conditions will not be able to be significantly worsened without employees’ consent, and the government will tighten up on staff rotation, outsourcing, temporary contracts and general job insecurity.
To protect workers from working unpaid overtime, it is likely that employees’ hours will have to be stipulated in their contracts if they are part-time and a clocking in and out system is to become obligatory.
For the self-employed, the government aims to allow them not to pay IVA on invoices issued until they have been paid, to avoid them being out of pocket; all self-employed persons, irrespective of earnings, are required to charge IVA and pay it quarterly to the tax office, which can leave workers in financial difficulty if their have not received payment from the debtor first.
There are plans – although imprecise at the moment – to link Social Security payments to actual earnings rather than charging a blanket €278.88 per month to everyone, irrespective of their income, even if this less. Low-income and self-employed workers will be ‘guaranteed a lower Social Security contribution’, although it is still unclear whether the government will make these payments a percentage, rather than a scale of flat rates.
The government will restore the additional unemployment benefit for the over-52’s, and eligibility, will be based upon their personal income, not that of their household unit.
CHILD BENEFIT TO RISE.
Currently €291 per year, per child, the government plans to pay €473 per child annually from 2019 in a bid to wipe out poverty amongst children.
ADDITIONAL €5.7 BILLION IN TAXES ‘WILL NOT AFFECT LOW OR MIDDLE -INCOME EARNERS.
Maria Jesús Montero who is the Minister for the treasury says Spain ‘needs this budget’ in order to ‘improve the quality of life’ for its residents, and that the extra tax clawed back by the government in 2019 will come to just €5.68 billion, but that the impact on the majority of taxpayers will be ‘minimal’.
Those who end up having to reach deeper into their pockets number about 0.5% of the population, the Minister assures them by saying,
“Our number one principle is that those who have the greatest financial capacity should contribute the most. Not only will these tax rises have no effect on the working class or even the middle class, but on the contrary, it will help them – 0.5% of the population will pay more, but the remaining 99.5% will not pay any extra.”
Snr. Montero adds, that there are plans to increase company profit tax by 15% which will only affect major national and multi-national corporations, not small and medium-sized enterprises, and an increase of 18% will be levied on major financial entities such as high-street banks and on companies working in the fossil-fuel industry, whose profit tax is already 30%.
PENSIONS TO RISE IN LINE WITH INFLATION.
Non-contributory and minimum pensions will rise by 3% per year, and all others will go up by the rate of inflation, which is currently around 1.6%.
The aim is that, ‘over time’, minimum State pensions will be at least 60% of the national average salary and non-contributory minimum pensions at lest 60% of the national average income.
Carers of dependants will be able to continue paying their Social Security stamp even if they are not in paid work, so they can still save towards a pension.
Benefits for dependants will rise ‘significantly’, although details have not been given.
Pensioners will not have to pay towards their prosthetics, prescriptions or non-emergency ambulance transport eventually, starting with those on household incomes of €800 or less a month where they are widowed or have a dependant spouse, or those in family units earning less that €9000 per year where they have at least one of their children as a dependant – a move that will help 6.8 million retirees in Spain.