Does the wine have to pay the adjustment of the 5,000 million euros that Europe requires to Spain?

By Juan Fuente, wine spokesman of Cooperatives Agro-food Castilla-La Mancha

From Cooperatives Agro-alimentary CLM we join the claim and manifesto of the sector of beverages with alcoholic content -all to one in an unprecedented act in which representatives of the entire agricultural, industrial, commercial distribution and channel value chain HORECA) – demanding the maintenance of taxation in the current terms, with the aim of continuing to contribute to the growth of the Spanish economy and its competitiveness, to the generation of employment and to the retributive contribution to public finances.

That is to say, we do not believe that to put more taxes on wine, one of the sectors threatened by the new fiscal pressure that the Government of Spain wants to put in place to fulfill the objectives of Europe, that demands to Spain an adjustment in the expenditure of 5,000 million of euros, is the way to meet this goal of deficit reduction.

That is why, from Cooperativa Agro-alimentarias Castilla-La Mancha, we join the defense of maintaining current levels of taxation, based on the analysis of the report “The sector of beverages with alcoholic content and its relevance in the Spanish economy”, elaborated By AFI (International Financial Analysts) and subscribed, among other organizations, by Agro-alimentary Cooperatives of Spain, which detail and quantify the effects of maintaining the current fiscal policy in the sector, in terms of contribution to the economy, the generation of employment and tax collection, as well as the impact of a hypothetical increase in taxation in these areas.

What would happen if fiscal policy was maintained?

• Economic activity (GVA, Gross Added Value) would increase by 3,448 M € (representing an increase of 8.6% over the current contribution of the sector to GDP);

• 64,061 jobs could be generated throughout the value chain; Y

• The tax contribution of the sector’s value chain would increase by 1,718 M €.

What would happen if the fiscal policy is increased?

• Decrease in economic activity (GVA) of 3,660 M €, equivalent to 9.2% of the total contribution of the sector;

• A loss of 52,734 jobs in the value chain as a whole (7.1% of total current job positions);

• A net tax loss for the public coffers of 46 M €.

But if they do not believe us, winegrowers and the whole chain of value in general that encompasses not only wine, but other products with alcoholic graduation, create the data:

• With current taxation and growth forecasts, the tax contribution of the sector’s value chain could increase by € 1,718 million, € 3,448 million in GVA and generate 64,061 jobs (2014-2017)

• Increasing taxation, based on the assumptions established, would reduce economic activity (GVA) by 3,660 M €, 52,734 jobs would be lost and there would be a net tax loss of 46 M € in the first year

The balance between the two scenarios shows that the maintenance of current taxation would generate a contribution of € 3,977 million more to GDP (0.4% of the total), 73,879 jobs and an additional € 709 million of tax revenue

• The increase in the collection of special taxes and VAT would be more than offset by the loss of tax contribution of the rest of tax figures, due to a fall in activity, both in the value chain and in the economy as a whole

• Potential VAT increases could affect the lower income segments (regression effect on income distribution) and tourism, because of their sensitivity to price

Recent international cases show that taxation, starting from a certain threshold, is an ineffective instrument.