The irreconcilable positions on the right and left of the PSOE are frustrating the government’s attempt to undertake sufficient tax reform to comply with Brussels’ demands. Most of the fiscal package is wrecked and calls into question the viability of a budgetary project – that of 2025 – which requires consensus, which does not exist today. Only a handful of amendments, transformed into transactional amendments, managed to prosper. This is the technical correction of the changes made by former Minister Montoro for Business and the increase in the maximum rate of personal income tax on capital income for income above 300,000 euros . On the other hand, and despite the PSOE’s attempt, the permanence of the bank tax was rejected by the Finance Commission, which was postponed up to twice. The permanence of the tribute to energy companies is canceled following pressure from Junts. “We will not accept this blackmail,” said ERC’s Pilar Vallugera, who accused Junts of being a entrance hall at the service of Repsol.
In this way, those of María Jesús Montero save –to the extreme– the original text which proposes imposing a minimum tax of 15% on multinationals. A transposition of a European directive, which Spain is obliged to approve to avoid sanctions from the community authorities. The maneuver, however, reveals the failure of the parliamentary strategy of the Executive, which could have scored a small goal around a bill, which however decided to get confused with the tax package.
Taxes on energy companies and banks, which if left unaddressed will expire on December 31, are therefore still on the way. The list of measures proposed by coalition partners to promote is shrinking, including the removal of tax exemptions for SOCIMI and private health insurance.
Without a solid fiscal package, the receipt of pending European funding is at risk. First of all, the tax reform fiasco threatens the 7.5 billion of the fifth tranche of the “Next Generation”, although it also jeopardizes the collection of an additional 4.0 billion of the sixth tranche. This also calls into question the commitment to respect European rules, which Moncloa sent to Brussels a month ago as part of the structural budget plan. The document based part of its success on the approval of a tax reform capable of increasing revenues by three tenths of GDP, or around 4.5 billion euros.
The failure of tax reform began to become apparent a few weeks ago. Set announced his rejection of the permanence of the tax on energy companies for fear that Repsol would carry out its threat and transfer to Portugal a 1.1 billion project proposed in Tarragona. The PSOE accepted it, but lost the support of the rest of the groups to its left, who warned that they would not accept a text that did not include the tax on electricity companies.
Ferraz tried to “salvage” the tension by giving in to Sumar and pledging to add to the reform a larger tax seat against high incomes by “punishing” real estate investment companies or private health care. The agreement of the coalition partners, far from reorienting the negotiation, added a new disagreement between the PNV and Puigdemont, and the ERC, Bildu or Podemos. “Repsol has decided, through its lackeys, that there will be no tax on energy companies“, denounced the ERC deputy. “The proposal is far from being partisan and made in favor of the Catalans”, defended the spokesperson for the Junts, Josep Maria Cruset.
At this point, the new parliamentary “stumble” of the government has also weakened the fragile balance that Sánchez managed to create around his inauguration. The political divide is such that the PNV spokesperson abandoned political prudence this morning to go on the attack. Its spokesperson, Aitor Esteban, accused Podemos of being locked into the “no” to the removal of the tax on energy companies, of having “been tempted to force new elections”. It should be remembered that Ione Belarra’s main electoral competitor – Sumar – is particularly weakened, after the scandal triggered by the “Errejón case”.
On the sidelines, the Executive has no other choice than to try to restore parliamentary calm, to look for ways to redo a minimum tax reform project with more options for success and to open the way to budgets. However, this will require time which Moncloa does not have. The community timetable requires Spain to approve the tax package before the end of the year.
