The tax reform that experts have been calling for for years, that the main international economic institutions are recommending and that the European Commission is calling for is underway in Spain, although its final form is difficult to see. The path that the coalition government has chosen to deal with tax changes to “move towards a more progressive tax system, where those who have more must contribute more”, in the words of the Ministry of Finance, involves dozens of amendments “to the law transposing the second pillar of the OECD” – the minimum tax of 15% on the profits of multinationals –.
But this path, in addition to being unusual, puts the two colleagues in the coalition government at odds. The PSOE and Sumar presented separate amendments – the deadline expired this Wednesday. These amendments are different, some antagonistic, and they also keep divided the rest of the bloc of political parties that supported the inauguration and that are necessary to form majorities in the Congress of Deputies.
Informed sources explained to elDiario.es that these amendments will be voted on during the plenary session of Congress on Thursday, November 14. This delay implies that the negotiations will be intense in the coming days, given that the development of the law on the minimum tax of 15% for large companies requires going through the Finance Commission, before arriving at the plenary session. In fact, other involved sources consulted prefer not to advance a date.
Without a doubt, the starting point is demanding. The PSOE presented its amendments in a 139-page document that was mainly publicly celebrated by the PNV, the Junts and energy companies. This “triumvirate” has aligned its interests for weeks and organized a pressure campaign against the commitment of the agreement to form a government between the PSOE and Sumar to transform the temporary tax (until this year) in extraordinary profits from oil, gas and electricity. companies to a permanent tax.
Energy tax
For now, the PSOE has complied with the PNV and the Junts. Among the socialist amendments is not the energy tax. Repsol CEO Josu Jon Imaz celebrated this Thursday. “Fortunately, the problem is resolved,” he said. “Now is the time to focus on the future and the opportunities that lie ahead. » This is a “positive decision which allows us to move forward with the industrial investments that we have planned in Spain”, declared the director of the oil company, the company most affected by this tax, which had threatened to transfer to Portugal the investments planned in Tarragona. . Cepsa, for its part, had made a similar threat, with other investments.
Similar euphoria was expressed this Thursday by the spokesperson for the Junts in Congress, Miriam Nogueras. “We have managed to save investments in Catalonia, to save jobs in Catalonia and we have also managed to prevent citizens’ bills from increasing,” he said. “We are doing what Mr. Illa will never do, because some give priority to the Spanish state, while our priority is Catalonia,” he concluded.
“The reality is that there is now no majority in Congress to approve the tax on energy companies,” lament sources from the Ministry of Finance, in response to questions from elDiario.es. The first vice-president and Minister of Finance had already warned that this commitment was on hold. However, Sumar included it among his amendments. His document is 104 pages long and does not coincide with that of the PSOE.
But the unease about the future of this tax does not only come from the Executive colleague. Podemos warned the PSOE on Thursday that it would not support in Congress “the reform of corporate tax if it involves the abolition of the tax on energy companies”. ERC is in the same position. Meanwhile, the sector continues to post record profits (which the temporary taxes have not prevented).
Bank tax
The other major divergence within the coalition government concerns the banking tax, which is also seeing historic gains these days. In this case, the PSOE included an amendment aimed at creating a “tax on the interest margin and commissions of certain financial entities”. As the socialists explain, “this would involve taxing the interest margin and commissions obtained by credit institutions and branches in Spain of foreign credit institutions, in the activities they carry out in Spain” .
“The tax rate will be progressive (from 1% to 6% depending on the tax base). The tax allows for the deduction of 25% of corporate tax. Furthermore, an extraordinary deduction is introduced in the event of a lasting decline in their profitability. It will take effect for the tax periods starting January 1, 2024 and will be paid in 2025. It will be applicable for three consecutive years from 2024,” adds the PSOE.
With this formula, all banks believe that it is “discriminatory”. Among them, Sabadell was the most optimistic about introducing changes during the parliamentary process. In the sector, we have the feeling of not having been able to play our cards as well as those of energy. “There was an attempt at dialogue and the channels were not effective,” explained Sabadell CEO César González-Bueno on Thursday.
On the other hand, the PSOE proposal also clashes with the intentions of Sumar, Podemos or ERC. In addition to design issues, the party led by Yolanda Díaz does not agree with what the PNV celebrates, which managed to ensure that both this new tax and the modification of companies enter the Euskadi agreement. In other words, the Autonomous Community will collect it and manage it, so you can subsidize it if you wish.
This objective of the PNV was denounced by EH Bildu. This party says it “agrees” with the agreement on taxes so that they are managed by Basque institutions. The difference with the right is that “sovereignty is a tool for building just and egalitarian societies, and not for defending certain interests”, according to remarks made this Thursday by its spokesperson Pello Otxandiano.
The continuation of the tax reform
Spain must complete these tax reforms to receive the 7.5 billion euros of the fifth installment of funds from the European Recovery Plan. But the parliamentary weakness of the coalition government and internal disagreements complicate matters. The tax changes are also necessary to comply with the fiscal and structural plan that the government sent to the European Commission on October 15. Without a more efficient and fairer tax system, the risk is that the “adjustment” required by the new EU budgetary rules will turn into a new episode of cuts and austerity.
The PSOE amendments include changes to corporate tax to adapt to court rulings. “A limit is again set so that large companies or groups of companies can apply deductions to compensate for negative tax bases. The limit is 50% per year for companies with a turnover of between 20 million and 60 million euros and 25% for those exceeding 60 million euros. “The measure is in line with what was indicated by the Constitutional Court this year, which annulled the rule approved by Minister Cristóbal Montoro for the use of a royal decree-law to substantially modify the corporate tax” , detail the socialists.
“With this amendment, the legislative error of the PP is corrected, this time using a law as a legal instrument to approve the modification of the Companies,” they continue.
Another modification of the PSOE consists of increasing by one point (from 28% to 29%) the taxation of capital income above 300,000 euros. “It is a measure which advances the progressiveness of the tax and allows progress in the equalization of taxation of labor and capital income. This is part of the government’s idea that whoever earns the most should contribute to maintaining public services,” they say.
Equalization of taxation of diesel compared to gasoline
The PSOE tax reform also eliminates the diesel bonus compared to gasoline. “The measure does not concern professional diesel,” they specify. “It’s an environmental measure to fight climate change. Follow the recommendations made by international organizations such as the European Commission. It makes no sense from an environmental or health perspective to encourage or subsidize diesel over gasoline,” defends the Treasury.
In the design, there is a mechanism to reduce taxes if diesel prices rise steadily. Concretely, if for two consecutive months the average price of diesel exceeds 2 euros per liter and the average price of a barrel of Brent increases this second month above the average of the previous month. The measure would take effect on April 1, 2025 if approved.
Tax on electronic cigarettes
Another new figure concerns the consumption of liquids for cigarettes and electronic vaporizers, nicotine pouches and other nicotine-based products. “The objective is to fight against the increase in consumption, particularly among the youngest,” underlines the PSOE.
Other issues are also addressed, in particular “being able to tax VAT on rentals of tourist accommodation in areas where the abundance of this accommodation makes access to accommodation difficult or in saturated areas. “This is a community directive that the government is promoting to be approved.”
Inheritances and great fortunes
Agreement on some of these issues is underway between the PSOE and Sumar, as well as others. For example, the creation of a solidarity tax on large inheritances “to avoid downward tax competition in terms of inheritance and gift taxes”. “The national inheritance tax would be established for those who exceed 1 million euros and would be the difference between the state tax and that established by the autonomous communities, encouraging the latter not to reduce the tax by below the established minimum,” say executive sources. .
They also seek to improve the temporary solidarity tax of large fortunes, which they say has been effective in “ending tax competition between autonomous communities in matters of wealth tax, thus improving the progressivity of the tax system and ensuring that the wealthy contribute to the financing of public services.” .”
