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IEB Report 3/2022 Reviews White Paper on Tax Reform

The Barcelona Institute of Economics (IEB) has published its third IEB Report of 2022. This latest report provides a detailed analysis of some of the most important aspects of the White Paper on Tax Reform. This report on tax reform in Spain was drawn up by an expert committee chaired by Jesús Ruiz-Huerta, Professor Emeritus of Applied Economics at Rey Juan Carlos University in Madrid, and published last March. There are a number of compelling reasons why the tax system needs to evolve, including serious environmental problems, the energy crisis and digitalisation.

With this latest report, the IEB delves into some of the issues raised by the white paper. Coordinated by Alejandro Esteller-Moré, Professor at the University of Barcelona (UB) and Researcher at the IEB, the report features articles by three renowned scholars: Wojciech Kopczuk, Professor of Economics at Columbia University; Juan José Rubio Guerrero, Professor of Economics at the University of Castilla–La Mancha (UCLM); and Jesús Ruiz-Huerta himself.

In his contribution to the IEB Report 3/2022, Prof. Kopczuk takes a unique look at the redistributive role of the public sector. He suggests two ways of thinking about the issue: one is to focus on the design and implementation of a progressive tax system, and the other is to separate redistribution from taxation – in other words, to place less importance on the progressivity of taxation, focusing instead on progressive spending of tax revenue through social assistance and insurance programmes. On the basis of a comparative analysis of results observed in various countries, he concludes that successful redistributive systems are characterised by the collection of a high level of revenue that is spent very progressively to favour the most disadvantaged classes but financed by means of relatively proportional taxes that hit the middle classes with only moderate levels of progressivity in the upper brackets.

Prof. Ruiz-Huerta’s contribution to the IEB Report summarises the contents of the report, whose main recommendation, based on the expert committee’s diagnosis of the Spanish tax system, is to broaden the tax bases of various types of tax. Although the white paper focuses primarily on analysing the tax system, it also contains interesting proposals regarding the implementation of refundable credits to alleviate situations of poverty, to offset the negative impact of tax modifications and even to encourage participation in the labour market. Prof. Ruiz-Huerta’s contribution goes on to review the main aspects of the white paper’s proposals on environmental taxation, corporate taxation, taxation of the digital economy and emerging economic activities, and wealth taxation.

The third article is by Prof. Rubio Guerrero, whose knowledge of the Spanish tax system nicely complements Prof. Ruiz-Huerta’s contribution. From the outset, he makes clear his position on what the framework of the tax system should be: a stable structure that avoids schemes with dubious revenue-raising effects, is coordinated with the regional administrations, and contributes to economic growth and the creation of stable employment. Prof. Rubio Guerrero goes on to analyse the 10 main lines of argument that any debate on comprehensive tax reform must address. In accordance with his initial position, these arguments include creating an attractive tax environment for international investment, incentivising participation in the labour market and reducing the individual tax burden, supporting families as an element of social structuring and stability, and developing the tax administration as a fundamental instrument for achieving a higher degree of tax compliance.