To change Icon Spacing on the Desktop, you need to directly modify the Windows registry.
IconSpacing: -1125 (default)
IconVerticalSpacing: -1125 (default)
IconSpacing: 0
IconVerticalSpacing: 0
IconSpacing: -2000
IconVerticalSpacing: -2000
To Change Icon Spacing on the Desktop Through Windows Registry
Warning: Modifying the Windows Registry directly through Registry Editor (Regedit) may cause problem to Windows. Proceed with caution. Before making any registry changes, make sure that you already familiar with the basics of the Windows Registry.