IMF revises Spain’s policy against inflation: asks for aid for the vulnerable, does not cap prices and avoids general measures

International Monetary Fund (IMF) Published this Tuesday recipes against inflation and, in particular, fiscal policy guidelines that governments must follow to counteract the effects of price increases energy And this Foods in economy and society. Its recommendations are a far cry from the measures approved in Spain to this day and, in many cases, they even go in the opposite direction.

“The Treasury policy have an important role to play Minimizing the impact on the most vulnerable families. Governments must strike a balance between ensuring access to energy and food, normalize your fiscal policy After the unprecedented expansion in 2020 and promoting green transition“, indicates the institution giving instructions Kristalina Georgieva.

Although it considers circumstances specific to each country, it includes councils in three groups based on the level of development and coverage of its social security system.

Spain a. will be placed between the passes with strong social safety netwhich the IMF recommends five guidelines Concrete which is not found in our country. First, they ask you to pass them let the prices go up And that the growth in the international market is transferred to the domestic market. This means, in practice, that The fund does not recommend approving value limitsas the executive intends to implement in our country at the cost of gas,

“Countries must allow the increase in international fuel prices to be fully transmitted to national users. Price signals are important To induce demand responses. In the case of energy, the demand response can be considerable (…) Conversely, food is a basic good that takes up a substantial portion of the income of the poor and can be less price elastic. So, Priority should be given to ensuring affordable access to basic food items. Especially when food security is a concern,” he explains.

In his opinion, higher energy prices encourage “more efficient use” And a increased investment in renewable energyBoth desirable things. “Measures aimed at preventing domestic prices from adjusting are costly, displace producer spending and reduce incentives for producers,” he says.

Second, he believes that countries should give direct assistancetemporarily, in the form of transfers for the most vulnerable families, a petition that is in line with others that have been launched by organizations such as the Economic and Social Council. At present, the government has not announced any such subsidy to reduce the impact of inflation on the most vulnerable households.

“Countries with strong social safety nets can use Exclusive and temporary cash transfers to reduce the impact on vulnerable and low income groups, They can identify families that meet needs in order to better target aid and provide it efficiently (…)”, he explains. They also caution that it is better that This aid is not proportionate to their energy level or food consumption, the measure being to prevent distorting their behavior and, with it, prices.

They further suggest that governments make grants”refundable tax credit“For the most vulnerable families.

Avoid Coffee for Everyone

The third advice from the IMF is that countries avoid generalized aid for the entire population, as may be the case with Spain. 20 cents per liter of fuel bonus Which is applicable from last 1st April and which benefits high and low income equally.

“By crossing household income information with information on their bills, governments can offer lump sum discount to meet below a certain income limit, These are definite benefits Better as compared to the proportionate profit of the bills, because they are more progressive and less deformed“, Moisture.

Only if the social security system is not enough, does the IMF recommend easing energy consumption bills or implementing exemptions, but in both cases it will propose Aid targeted to the most vulnerable.

This body is also not in favor of general tax deduction. In Spain, a 7% tax on cogeneration has been suspended, the VAT tax rate on electricity reduced to 10% for consumers with less than 10 kW of contracted electricity, and a special tax on electricity reduced to 0.5% Is. Electricity, minimum authorized by the European Union. All these measures will be applicable till 30th of this month and can be extended during summers.

“usually, It is not fair to reduce taxes on energy and food, Given the prevalence of ad valorem taxes (such as VAT or excise duties), high prices and relatively low elasticity of demand mean that in many countries Tax revenue will increase as energy and food prices rise, this additional tax revenue Can be used to provide targeted assistance to vulnerable families“, Consider.

Despite the fact that the opposition has asked the government Reduce VAT or reduce IRFP rateAt present, no action has been taken in this regard and IMF discourages them Because they are not progressive and will cut the revenue of the state.

,General reduction in taxes means relief for all, including the most affluent families, and believes significant loss of income When they are needed the most”, they stress that taxes on fuel must continue to rise, in order to continue to counter the negative effects of pollution resulting from fuel use.

Finally, the IMF is also opposed to taxing Gains that fell from the sky or “unexpected gains”, seen in spain low For hydro, nuclear and wind power plants before 2013.

“Rise in energy prices and profits of some energy companies have created new demand for taxes on windfall profits. However, These taxes can discourage investment and be counterproductive.“, warns the IMF.

In addition, they ask that countries use resource efficiently and that strengthen international cooperation To ensure global food and energy supply.

examples of good and bad practice

In its report, the IMF reviews measures that have been approved to concentrate the effects of inflation in certain countries: Give relief to the weakest.

it is a matter Latviaone who has approved Monthly assistance for the elderly and disabled (from 20 euros) and at families with children (50 euros); Of Germany, Where single payment has been approved for vulnerable families 100 euro per child and other lump sum payments beneficiary of social benefits,

In Filipinas An unconditional cash transfer of 500 pesos (about 9 euros) per month has been announced 50% poor families (some 12 million families) for six months from April 2022; whereas Poland Has been approved resource-based profit (400 to 1,438 zlotys; 88 to 314 euros per family) poorest familyTo compensate for the increase in the cost of energy.

On the revenue side, Approved Measures in more advanced economies further away In accordance with the recommendations of the IMF, as in Spain. For example, VAT has been deducted Italy hey Blagica or special tax France, South Korea You New Zealand,

France have given dealer subsidy To reduce gasoline prices; Estonia, Luxembourg and Slovakia measures have been announced reduction in electricity prices; You Lithuania who has declared to raise the threshold Income exempt from taxation in personal income tax.

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