ISP Working Paper Number 06-07

The Reform of Indirect Taxation in Spain: VAT and Excise

José Sánchez Maldonado and J. Salvador Gómez Sala, January 2006

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Abstract:

In this chapter we analyze the reform and evolution of consumption taxes in Spain over recent decades, paying particular attention to the new developments stemming from the introduction of the VAT in 1986 and the modifications carried out to excise taxes in order to bring the Spanish tax system into line with European Community legislation. In the second section we proceed to review the situation of consumption taxation in Spain in the years previous to the democracy’s fiscal reform. The third section deals with a basic description of the before-mentioned reform and includes an analysis of its main economic. It ends with the consideration of the role of indirect taxation in the financing of the territorial governments. The fourth section describes the evoluation of the consumption taxation pattern in Spain in relation to other OECD countries, beginning in the year 1965. The fifth section analyzes the process of fiscal harmonization of the VAT and of excise taxes in the European Union. The incidence of indirect taxation in Spain is studied in the sixth section from a personal and territorial perspective, given the implications of this last one in the finance of regional and local governments (Comunidades Autónomas y Corporaciones Locales). In seventh section, we consider the main pending issues as well as a variety of future reform options. The last section of the paper offers some concluding thoughts.