Prime minister José Luis Rodríguez Zapatero reinstates the sort of wealth tax that he abolished just before the recession

This article is more than 9 years old

This article is more than 9 years old

Spain today became the latest European country to hike taxes on the wealthy, with a new asset-based tax targeting the country's richest people.

Spain's socialist government hopes that the new wealth tax will raise up to €1bn in a country where growth is grinding to a halt and this year's 6% deficit target looks increasingly tough to meet.

The move represents a U-turn for prime minister José Luis Rodríguez Zapatero, who abolished a similar wealth tax in 2008 — just before the country plunged towards recession.

"The economic crisis makes it necessary to bring this tax back, applying principles of fairness so that those with bigger assets can be taxed and so those who have greater wealth can contribute more to getting the country out of the crisis," a finance ministry statement said.

Spaniards with €700,000 of assets in real estate – excluding their main home – as well as in stocks and bank deposit will have to pay the new tax.

"It excludes the middle classes, who were the ones who had been largely affected by it when it was eliminated in 2008," the statement said.

"We estimate the number of people who will contribute at around 160,000, with annual payments of about €1.08bn if it is applied evenly across Spain," it added.

The wealth tax will go to Spain's cash-strapped regional governments, though some of them are opposed to it.

Only one of the eleven regions currently governed by the right-wing opposition People's Party (PP) has so far indicated that it will apply the tax. It remained unclear how many others, including the wealthy Madrid region, would join the PP-administered region of Extremadura.

But with fierce austerity measures in place, PP regional governments will come under intense pressure to use the tax.

"In moments of hardship it is fair that those who have more should give more, just as some of the wealthiest people in Germany and France have offered to do, especially as they are less affected by measures that have been applied to pensions, salaries, lay-offs and income tax or VAT hikes," said José María Mollinedo, head of the tax inspectors' union.

Spain's wealthy largely avoid income tax, with only some 7,000 people declaring annual taxable income above €600,000.

Emilio Botín, head of the Santander banking group and Spain's tenth wealthiest individual, said that he disagreed with the move. "I think it's bad," he told journalists.