Virtually all major European economies except Germany are already implementing – or considering doing so soon – higher taxes on large businesses. Four countries (including the United Kingdom), out of a total of five, perpetuate taxes created ad hoc due to the war in Ukraine, such as Spain, or resort to modifications of traditional taxes to increase income at the expense of larger companies. .
The latest government to take this step, in its proposed budget for 2025, is the new French executive led by conservative Michel Barnier, which has just approved a temporary increase in corporate tax for companies earning more than ‘a billion dollars a year.
For his part, the Italian Minister of Economy, Giancarlo Gioretti, also launched the order aimed at increasing taxes on companies that earned the most during the fiscal year. All this in a context in which they were already applying a very ineffective bank tax.
The expert of Tax FoundationCristina Enache, assured this newspaper that this type of measures will lead to “a loss of competitiveness” because companies “will not know whether they should invest or not and investments will lower wages and actions of capital”, which will affect the growth of the largest economies in the euro zone.
At the same time, Enache refers to a report from the European Parliament which concludes that, historically, taxes on extraordinary profits directly affect investment and that, as a result, the economic fabric of countries will become less and less competitive.
Competitiveness in Europe is at stake. The former president of the European Central Bank, Mario Draghi, declared this in his report commissioned by the European Commission in which he ensures that the Old Continent is not renewing itself to achieve its biggest rivals (China and the United States)it will therefore become absolutely useless at the global level if this trend continues.
In this sense, the new French tax model extends the theoretical tax rate from 25% to 30% in the first year and, for companies that earn more than 3 billion, a rate of 35% remains. At the same time, it also imposes a temporary wealth tax on families who pay taxes of more than half a million euros per year and for single people who have a reference tax income of 250 000 euros per year. For his part, few details are known about the Italian.
The explanation for these taxes, in the case of France and Italy, is that they would serve to clean up their poor accounts. The French expect to close this year with a deficit of 6% of GDP and the transalpine country is expected to end the year with a deficit of 3.8% in its accounts, according to government sources. Which is very far from what the community budgetary rules provide for to bring it below 3% before 2027.
Paris’ forecast collection with these two temporary taxes on the rich and large businesses is 20 billion euros. In the case of Italy, elEconomista.es contacted the country’s Ministry of Economy and did not want to make any statement regarding this announcement by the minister.
In Spain, in 2023 (when the rate begins to apply), the tax administration collected 2,908 million euros thanks to this taxremaining only 100 million below the entry forecast of 3 billion that they had made when announcing the tribute. Currently, they are considering making it permanent, with some modifications, according to the seven-year budget plan they sent to the European Commission.
Outside the European Union, the United Kingdom is also considering a rate of 38% (35% until November 1, 2024), which is in addition to the current rate of 40% on oil and gas. All of this generates an effective tax rate of 78%.
In this sense, Cristina Enache assures that the difference between this rate and the Spanish rate is that the British rate “is very specific” because it only applies to extraction companies, while that of Spain is aimed at companies energy in general.
The expert of Tax Foundation account to elEconomista.es that these types of taxes are “very damaging to the economy”. He says that even though companies pay them, “it’s on workers, consumers and dividends from shareholder investors.” In other words, a rate of this caliber on extraordinary profits “can cause companies to reduce the number of workers and increase unemployment”.
Something very different is happening with corporate tax, since the impact of this tax paid by a company “falls on the activity of the company”, he comments.
Germany is the only major economy that does not tax the extraordinary profits of large companies. Bundesbank sources assured this newspaper that, despite the complicated economic situation the country is going through, there are no plans for a similar tax to be imposed. Likewise, the only “solidarity” tax considered by the German Treasury is a 5.5% rate on corporate tax, introduced almost 30 years ago to finance the country’s reunification.
Initially, the tax was also applied to income, but in 2019 the Bundestag decided that German taxpayers would stop paying this rate from January 2021. The Ministry of Finance assured that this tax intended to pay for reunification had been collected between 1991 and 2010. of 340 billion euros.
