A tax reform is a process that establishes a modification of tax legislation.
A tax reform is a process or provision that modifies tax legislation . The Legislative Branch is responsible for changing laws or developing new regulations, which must be promulgated by the Executive Branch .
It should be noted that reform is the mechanism and consequence of reform , a verb that refers to changing something or forming it again. Fiscal , for its part, is that which is linked to the treasury (the state agencies empowered to collect taxes).
Characteristics of a tax reform
Tax reform is always linked to judicial changes since taxes are established by law . The rates , levies and general characteristics of each rate must be specified in the legislation: therefore, raising or lowering a tax is associated with a legal modification.
To understand how a tax reform is developed, you have to understand what taxes are. These are mandatory payments that the State imposes on its citizens to finance its operation. With the money collected from taxes, a Government in charge of the administration of the State can invest in the construction of hospitals and schools, the development of roads, the payment of pensions, etc.
To avoid abuses, taxes are set by law. That is to say: a Government cannot collect taxes according to its particular interests or desires, but can only collect them according to what is established by legislation . If you want to modify any aspect of taxes, you will have to promote, ultimately, a tax reform .
The taxes, rates and characteristics of the rates can be modified with a tax reform.
The case of Spain in the 19th century
In 1844, a fiscal reform (also called tributary ) was approved in Spain that laid the foundations for the tax system that the country has today. It all began a year earlier, in the summer, when generals Prim , Narváez and Serrano commanded a military pronouncement that forced the regent Baldomero Espartero to abandon his position and ended the progressive period that had begun in 1840 .
At only thirteen years old, Elizabeth II came of age (the normal thing would have been to wait one more year) and another reign began. The decision was based on the desire for there to be one more regency , which would have been the third.
That same year, Manuel Cantero de San Vicente held the position of Minister of Finance for a brief period, and it was then that he proposed to Ramón de Santillán that he create a commission to rule on the reform of the tax system of the time; and he did so on December 18 , the date by which Cantero was no longer minister, but had been succeeded by Juan José García-Carrasco .
Approval of the tax reform of 1845
Before the tax reform of '45 became a reality, it was necessary to analyze all the possibilities, thinking about how the system would be affected, taking into account the historical and rational principles on which they should be based to take such a step. The delivery of the opinion took place on August 5, 1944 to Alejandro Mon , who had replaced García-Carrasco in the Ministry of Finance a few months before.
A mon no le resultó fácil tomar una decisión tras evaluar las posibilidades que la reforma fiscal daría a la collection de impuestos, y por ello le tomó hasta el 10 de enero del año siguiente presentarla. Finalmente, en May 1845 se convirtió en ley, y representó un profundo cambio del sistema fiscal de Spain, ya que rompió con los esquemas asociados al Old Regime.
In short, the tax reform of 1845 prioritized direct taxes (taxing sources of wealth, income or property directly) over indirect taxes (taxing consumption).