angiescarr

This is definitely a PDT theme because we're all opinionated aren't we.

I left England with a very small but reasonably healthy business I paid taxes because I had the opportunity to earn a bit of money. I thought " My business doesn't rely on where I live...I can just as easily work in Spain" How wrong can you be!

Here are a few ideas from the UK model which I think Spain might do well to look at to improve the balance of trade..


What's changed for me for example, moving to Spain (apart from the obvious slowdown of the economy) is having to charge IVA makes my business uncompetitive with my peers in the UK. A business of my size in the UK does not collect IVA so can keep their prices down.
Postal rates make my business uncompetitive. People in the UK have a more efficient and cheaper postal system especially for printed paper (books). making ebusiness a healthy business in England . I lose trade when people see that my prices are higher not onnly by the IVA but by the post too!

Tax is paid at the end of the year when you actually owe it in England . Here you have to pay tax on every penny every three months and then you get back your personal allowance. When you are really struggling this is really harsh!
The levels of National insurance on the Autonomo are flat and therefore exorbitant for the very small business and yet 'piddling' for the rich.
They are offering Seguridad social for a lower rate for start ups but it needs to be extended to all struggling small businesses. Small businesses are where everyone starts. Some will go on to pay reasonably large tax bills if they are nurtured!
I would cut IVA on very small businesses. Raise taxes on corporations, rid the country of corruption from the top down but definitely starting with the top! and encourage ebusiness which is almost ignored as possible income for this country. It's very difficult for example to set up an account to pay paypal into and then pay it in. Our local bank recently refused the few cents Paypal put in My OHs account to create the passcode which authorises the bank account, because it was too small an amount to accept! Seems they don't even really understand how a major player in ebusiness works! Yes my husband and I are 2 very tiny fish in the big pool of Spain. But we are indicative of the problem that small but international sellers have here. The government completely ignores the millions who could and would increase international trade. Encouraging international trade has to help the net income of Spain over all doesn't it?

cricketman

You have to make the distinction between what would make your business more competitive and what would make Spain as a country more competitive, they are completely different questions

Spanish exports are actually doing really well, they are higher now than they have ever been and growing quickly mainly because of the low prices and low labour costs in Spain, but also due to some specialists high quality products that are unique to Spain

It is the Spanish domestic market that is struggling. Mainly because it is still suffering from the construction boom so the banking system is a mess.

Spain has a higher rate of self-employment than the UK and a higher percentage of small businesses than the UK, but of course a lot of these will be because the person could not find a permanent employment position.

Interestingly the UK job market since 2008 is starting to look more like the Spansh one. Self-employment rates have boomed in the UK (some say because of changes in the tax credits rules) and wages have seen the biggest fall in the UK over the past 5 years than in any other European country

angiescarr

What your figures seem to indicate is that bigger business is doing OK in Spain for exports. But then they would because Spain has always been a large net exporter of food. Long may that continue. They could of course be a net exporter of energy if they really got their fingers out too. All could be good news. So is it just the very small businesses who are suffering here? Doesn't that mean that if they supported the smaller business unemployment would drop and the general fiscal health of the country would improve. I certainly don't think there'll ever be a return to full employment or the 40 hour working week anywhere in Europe. So How does Spain stop feeling like one of the poor relations in Europe even though it ought to have everything going for it?

cricketman

Spain doesnt feel like "one of the poor relations in Europe" to me. It depends on where you live in Spain

If you lived in Middlesborough then you would think that the UK was incredibly poor. If you lived in Detroit in the US then you would think you were in a third world country. British people are attracted to live in the poorest parts of Spain because they like the sun.

Unemployment is high in Spain because it has always been high since Franco died. The drop in unemployment in the early 2000s was due to the artificially created construction boom.

To increase employment then Spain needs to sell itself as a base for international companies, especially European ones. They are at a disadvantage there because of the language issues, not just Spanish but the local languages, Basque, Catalan etc. And because Spain isnt at the centre of Europe and never has been

The UK beenfits tremendously from London. Thousands of international companies choose London as the base of their European operations mainly because it is English speaking. For American companies, it makes sense to run their European operations from there, as it does for Asian companies, or may speak English, but not Spanish or French, German etc

Anyway lets not exagerrate the situation. Since the 2008 crash, Spain has done no worse than any other country. In fact, I am surprised it didn't go bankrupt, but that situation was entirely due to the property/credit bubble. Something London is going through now

johnnyone

Totally different. London has a shortage of housing, Spain built masses of unwanted property in the wrong locations.
Yes there may be a correction in London (I hope that is the case) but there will not be a crash.

cricketman

Famous last words

amideislas

Sounds ominous enough, but if London property were to crash, London property would crash. I seriously doubt you'd feel it in Oviedo (unless of course you have a mortgage on a London property).

cricketman

I sold my London property a couple of years ago

I am simply interested in economics. The London market will crash - or correct whatever you want to call it Or the pound will devalue or we will see inflation heat up. Something has to give. You can only keep the illussion trick up for so long

I am still waiting for prices do drop a little more before hopefully buying an early 20th Century palace up here in Asturias, maybe with its own access to the beach. A wild dream I know, but not so far away And at about the same price as a 2 bed flat in a nice-ish part of London

johnnyone

Supply and demand?

Maybe1day

I see that it is possible to start up a company in Spain and pay only 50 E per month contributions. It was for under 30s but that limit has gone now. as for taxes we had a company for 5 yrs and closed it down 2 yrs ago. We only paid tax the following June of each year. We paid IVA and the rent retention every 3months. As for postage we have bought items on ebay and have found that the postage from the UK is exhorbitant for items that are over a few 100g.
I used to buy old radios from the UK but the postage costs became more than the radios. Germany, Italy France and most other countries apart from the US are much better.

angiescarr

The retention you're talking about is probably the same as the tax I'm talking about. It comes to the same thing. The adjustment is made at the end of the year and is paid back in about September the following year if they owe you anything.

As for the lower autonomo Seguridad Social charge, It's only available to those who've been previously unemployed here. Just For the information of anyone thinking they can set up only paying that.

Maybe1day

We have always received over paid taxes back in July or within 2 weeks of any contentious things being resolved. Maybe this is just Andalusia. If there are any outstanding taxes that have not been paid then you will not get anything back. Our accountant says that this is not true but practical experience has backed this up on several occasions.
I wasn't aware of the need to have already worked here, what is the minimum period necessary for compliance with the rules?

amideislas

"competition" is still a somewhat "foreign" concept here, still favouring the old concept of "protectionism" over encouraging businesses to compete, especially when it comes to big, inefficient businesses who employ 1000's of people.

Instead of penalising them for being inefficient (and risk losing taxpaying employees) the conventional government-mindset is to protect them from such "unfair" practices by penalising more efficient competition.

And having said that, I'd argue that in itself could make Spain a lot more competitive. We have to get away from these old socialistic notions.

Taxes are another area where Spain could make huge advancements in competitiveness. Tax relief has historically proven to stimulate weak economies and put people to work.

Instead, our government, still retaining many of the old ideologies of being the master controller of all things, still believes that if it spends too much, no worries, simply tax the population more, so we can continue to spend as we see fit. Little interest in cutting taxes or spending, which have always proven to have hugely positive impacts on a weak economy. But again, tax revenue is their money, not ours (as a matter of law). Our obligation is to earn it, whilst their job is to spend it - for the "common good" (translation: for the good of the government).

Besides, no doubt Spain, shackled by EU bailouts, would be widely considered "uncompetitive" if it exhibited significant "unfair" tax advantages or otherwise became substantially more competitive than the dominant EU political members.