Barcelona (CNA). - After a week of negotiations, the three-party coalition government of Catalonia has finally approved a two-percentage-point tax increase for those who earn more than € 120,000 and a four percentage-point increase for those who earn more than € 175,000 a year. The income tax will represent, in 2011, for the first group of higher earners 45% and, for the second group, 47%. The Minister for Economy of the Catalan Government, Antoni Castells, explained that these changes will affect about 20,000 taxpayers, the equivalent of 0.5% of the population, and would lead to 75 million euros of additional funding.
Catalan Minister of Finance Antoni Castells explained that this increase will take effect in 2011. It will directly affect the 19,487 taxpayers that earn more than 120,000 euros and the 8,125 people taxpayers who earn more than 175,000 euros per annum. Until now, a 43% maximum rate was applied to those incomes higher than 53,400 euros a year, but two new maximum rates are to be introduced. A maximum 45% rate will be applied to those in the 120,000 euro wage bracket, while a top rate of 47% will be fixed for those annual incomes beyond 175,000 euros.
A part of the income tax is fixed by the Spanish Government and another one by the autonomous community governments. Until this decision, the Catalan administration was taking 21.5% of the wages of high earners. Now this figure will correspond to 23.5% and 25.5% respectively. The Catalan Government has taken this measure with its first priority aiming to reduce public deficit before stimulating economic growth. Moreover, Castells ensured that the rise in income tax is a permanent measure without an expiry date. “Obviously, it can be modified, but we would like to maintain this measure”, added Castells.
As this measure was being passed, the main public trade unions were demonstrating in front of the Catalan Government. The demonstrators wanted to submit a letter to the Catalan President, José Montilla, in order to condemn the governmental measures to reduce public deficit. According to the organisers, about 4,000 people joined in the demonstration that precedes a larger one planned for public sector workers on the 8Th of June.