ISP Working Paper Number 06-03

Tax Reform in Perspective: The Role of the Public Sector in Spain Along the Process of European Integration.

José Manuel Gonález-Páramo and Pablo Hernandez de Cos, January 2006

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Abstract:

The fundamental tax reform undertaken in the late 70s by the first democratic governments helped to overcome the antiquated tax regime, kicking off a panoply of other reforms and laying the revenue foundations for the transformation of Spain 's public sector. Indeed, the nature of today's tax reform dilemmas has little to do with the contents of the debates that took place in the 70s. Current policy options are placed firmly in the camp of advanced market economies. This sharp contrast can be understood only in the context of the overall evolution of the public sector along the intense process of European integration. The single most important characteristic of the Spanish economy in the last decades has been its increasing involvement in Europe . Though the gradual opening up to the outside world began in the early 60s, after a long period of autarky, the process of adoption of more outwardly oriented policies was not definitively consolidated until Spain's accession to the European Community (EC) on January 1, 1986.