US embassy cable - 05MADRID2169

UNCLAS MADRID 002169 
 
SIPDIS 
 
TREASURY PASS TRACI PHILLIPS 
 
E.O. 12958: N/A 
TAGS: ECON, EFIN, SP 
SUBJECT: SPAIN'S 2003 TAX BURDEN RISES 0.45 PERCENT OVER 
2003 
 
REF: MADRID 02109 
 
1. Summary.  Spain's 2004 tax burden rose slightly to 34.45 
percent of GDP, a 0.45 percent rise over 2003.  This figure 
is calculated using the new GDP base year of 2000, and would 
be 36.12 percent of GDP under the older calculation year of 
1995 (reftel).  The Socialist government promised that the 
tax burden would not rise during its term in office.  The 
government's calculations show that the increase was due to 
higher taxes at the autonomous regional and municipal 
government level, rather than at the national level.  Spain's 
tax burden is 16th among the EU-25 and 14th among the EU-15. 
End Summary. 
 
2. The Ministry of Economy and Finance published June 6 the 
calculations for the 2004 tax burden as a percentage of GDP. 
The overall tax burden in Spain rose 0.45 to 34.45 of GDP 
over 2003 under the new base year of 2000 used to determine 
GDP in Spain.  Under the older 1995 base year, the tax burden 
would have absorbed 36.12 percent of GDP.  Spain's 2004 GDP 
was EUR 837.57 million (USD 1.02 billion) and the tax burden 
equaled EUR 288.54 million (USD 354.4 million). 
 
3. The Socialist government promised that the tax burden in 
Spain would not increase during its term in office.  The 
Ministry of Economy and Finance argues that the increase in 
the tax burden occurred at the regional and municipal 
government levels, rather than the central government level. 
The calculations show that central government tax collections 
actually fell 0.26 percent, whereas regional government 
revenues rose 0.55 percent and municipal tax receipts rose 
0.14 percent. 
 
4. Even with the small 0.45 percent increase in 2004, Spain's 
tax burden is one of the lowest in the EU.  Spain held the 
sixteenth position in 2003 EU-25 tax burden figures, under 
the older 1995 base year.  Spain was immediately below the 
United Kingdom, and had a tax burden lower than all of the 
EU-15 members save Ireland. 
 
5. Spain's government debt is now calculated at 38.4 percent 
of GDP under the 2000 base year (40.3 percent under the 1995 
base year calculation). 
 
MANZANARES