Spain’s opposition leader says new tax on rich will cause capital flight to Portugal

By Alyssa McMurtry

OVIEDO, Spain (AA) - Spain's opposition leader on Friday slammed the government's plan to increase taxes on the rich, warning that it could drive large amounts of capital to neighboring Portugal.

“I hate to say it, but Portugal will probably be one of the main beneficiaries of this fiscal reform,” said Alberto Nunez Feijoo of the conservative Popular Party, insisting that Lisbon’s taxation system is “more attractive” than Madrid’s.

Speaking in the La Toja Forum in Galicia, Feijoo accused the government of “going after whoever they call rich” and called the new taxation plans “dogmatic” and “populist.”

The Spanish government’s plan, announced Thursday, includes a temporary wealth tax for people with assets above €3 million ($2.9 million) and an increase in income tax for those making more than €200,000 per year. It also reduces fiscal benefits for some large corporations.

At the same time, the plan aims to lower the tax burden for the lowest-earners and small businesses.

Feijoo warned that the new fiscal policy will not help the middle-class deal with the cost-of-living crisis and will cause Spain to lose the capacity to attract and create wealth.

Spanish Treasury Minister Maria Jesus Montero said Feijoo’s response to the new tax plan makes it clear that his party prioritizes protecting the interests of the economic elite above all else.

“Our government is convinced that we need to combat inequality,” she said.

The political war in Spain over taxes began earlier this month when some regional governments controlled by the Popular Party began announcing plans to lower taxes and eliminate an existing wealth tax.

The ongoing debate in Spain also coincides with the mini-budget recently revealed by the UK government. The UK plan, which includes a significant tax cut for the highest earners, spooked the markets and caused the pound to plummet.

Since the Spanish government announced the tax plan Thursday, the Ibex 35 benchmark stock index has increased slightly.

“The UK shows us the path not to follow,” said Spain’s Finance Minister Nadia Calvino earlier this week.

In Spain, 2023 is a big election year both nationally and locally, and politicians across the board are turning to fiscal policy to win popularity within a climate of high inflation.