Spanish government plans to temporarily raise tax rate for richest 1%

Spain’s Socialist Party-led coalition plans to impose a temporary higher tax rate on the country’s richest 1 percent from next year, in addition to a windfall profits tax on big energy companies and banks.

“We propose to redistribute efforts among the richest to fund everyone’s welfare state,” Socialist Prime Minister Pedro Sanchez said in a speech on Friday.

Finance Minister Maria Jesus Montero said the measure would only target millionaires.

She said the increase in tax revenue is expected to be used to ease the hardships caused by rising energy and food prices. Annual inflation in Spain climbed to 10.5% last month.

The government said the exact increase and scope of the tax measures were still being worked out.

The Socialist Party’s junior coalition partner Unidas Podemos (United We Can) is pushing for the new tax to be made permanent.

For those earning more than €300,000 (£265,000) a year, the current top income tax rate is 47%. The maximum capital gains tax is 26%.

Local governments, however, have some leeway on taxation, some of which has been cut by the conservative BJP – the country’s main opposition party – a move it says will spur economic growth.

In the coming weeks, lawmakers are expected to debate and vote on the government’s proposed windfall tax on companies.