Although the Spanish central government approves different tax measures that affect all territories of the country, there are many powers in this regard that fall directly on regional governmentsso that, for the same tax, differences in regulation can be observed within the different territories that make up the nation.
However, when these differences are very significant, for example when an autonomous community proposes significant tax cuts for taxpayers of this territory, is considered tax dumping, a term that can raise doubts, especially when used as an accusation between politicians of different parties.
A simple tax reduction in an autonomous community should not be considered tax dumping, as this term has a negative connotation when it reduces the tax obligations of companies or individuals. This is very aggressive compared to the average. which establish the rest of the regions in which the tax is applied.
Tax dumping can be used by some regional governments, for example, as a tool to encourage companies to establish their headquarters in the region or as a strategy to attract voters, when this tax cut affects workers and individuals.
If these bonuses or deductions occur aggressively, a unfair competition between companies located in different territories. At the same time, when they affect individuals, tax deductions can significantly reduce income and income, which compromises the sustainability of publicly funded services.
Example of tax dumping
One of the taxes that can best explain the tax dumping between the Spanish autonomous communities is the inheritance and gift tax, which is responsible for collecting transfers of assets and rights between people in the event of the death of the owner. In this tax, the difference between the autonomous communities is very notable.
The amount to pay to receive an inheritance will depend a lot on the territory in which you are located, since many of them, depending on the degree of kinship between the different parties, apply premiums and deductions, which can range from a better percentage up to 99%.
In fact, in the Community of Madrid, since 2023, it has been applied retroactively. a 99% reduction on inheritance and gift taxes for spouses, ascendants and descendants: “When the donee, the one who receives the donation, is a descendant (child, grandson…), spouse or ascendant (parents, grandparents…) and adoptive parents or adopted children, they “We have the right to apply a bonus of 99% of the tax on donations”, it is indicated on the portal of said Autonomous Government. This means that only 1% of the amount of the tax will have to be paid in taxes.
Likewise, donations formalized in a public document made after October 28, 2022 between brothers and sisters will be applied. a 25% bonus of the tax quotient in the Community of Madrid, as well as the same percentage of bonus for uncles and nephews.
These bonus percentages are not as high in other regions and, in fact, There has been talk recently of tax dumping. as an accusation against the president of the Community of Madrid, Isabel Díaz Ayuso, since she announced that this tax would still be subsidized in her territory. Specifically, the aforementioned 25% premium will increase to 50% for operations between brothers and between blood uncles and nephews.
Likewise, during the month of June, the Community of Madrid was also accused of tax dumping, on this occasion, due to the wealth tax. María Jesús Montero, in one of the plenary sessions, referred to this term: “Do you really believe that the exercise of fiscal autonomy consists of eliminating the wealth tax in Madrid, which caused tax dumping throughout Spain allowing us to collect more than 4 billion euros, Mrs. Gamarra?”
This accusation of tax dumping by the First Vice President and Minister of Finance arose from the fact that he had increased the wealth tax to three million euros and, thus, equalized the tax with the tax on large fortunes, which implied a loss of recovery of more than 4,000 million euros.
