ELASTICITY (c)  SOURCES: Agencia Tributaria, State Budget 2019 and Banco de España. a Sum of shared taxes (personal income tax, corporate income tax, VAT and excise duties) plus effective Social Security contributions. b Immediate supply of VAT information. In 2019, the submission date for VAT self-assessments shall be brought forward from the 30th to the 20th each month. This will mean that, for that year, revenue takings will cover 13 months, instead of 12. c Historical elasticities estimated by the European Commission. Overall, the Draft Budget assumes growth in tax revenues and social contributions of 8.2%, in budgetary terms, as a result of the entry into force of the measures announced, the effect of the above-mentioned SII and the growth in the tax bases, which basically depend on the macroeconomic situation (see Chart 9). These government revenue estimates are subject to significant downside risks, in National Accounts terms, arising from various considerations. First, the higher revenues under the new VAT SII system are not passed through to National Accounts items. Under European law – specifically, Article 2 of Regulation (EC) No 2516/2000 – the impact on the general government deficit of taxes and social contributions must follow the accrual principle. This means that taxes should affect the deficit of the period in which the taxable events giving rise to the tax payments take place.
This matters, not for issues of inclusivity or political correctness, but because common, mutually agreed standards are key to facilitating capital flows internationally. And more efficient allocation of capital internationally is vital for the developed and developing countries alike. But we have to recognise, at once, that committees composed of 150 members from every country in the United Nations are unlikely to be effective. To be effective, the standard-setting groups will need to remain relatively small, albeit differently balanced. So we must find methods, in addition to adjusting Committee memberships, which allow us to secure the benefit of the experience of others from different backgrounds. To get this benefit we must create the right sort of opportunities for dialogue, and ensure there is sufficient capacity amongst emerging market countries to propose constructive solutions. Of course Singapore, as a major financial centre, is probably in a position to share skills with others rather than require assistance. Nonetheless, the point remains that emerging markets themselves need to formulate their opinions effectively and to be listened to by the key committees. Formulating an opinion requires both technical skills and organisation. The UK has been active in strengthening the regulatory skill set in Emerging Markets. As a major contributor to the Financial Sector Reform and Strengthening (FIRST) initiative – a $ multi-donor capacity building programme for financial sectors in developing countries – we believe that resources must be both forthcoming and targeted appropriately.