Unlike some sectors, such as energy providers, banks have not been very active in court battles historically. However, all signs point to a shift in the near term, as a new tax targeting large and medium-sized financial institutions was surprisingly announced by Pedro Sanchez last July. Industry observers argue the design is unconstitutional in its current form. As the proposal moves through the parliamentary process, the prevailing banking strategy today centers on pursuing judicial challenges. It could unfold into a lengthy legal struggle, potentially lasting up to eight years given the resources at stake.
Since the bill comes from the ruling coalition, PSOE and United We Can, the Constitutional Court is the only body that can formally take the bill to review if called upon by parliamentary groups or by at least 50 deputies or 50 senators. Some banks may hope that partners like PP or Vox will mount a challenge, but the likelihood appears low due to the political cost of taking an unpopular move in a country heading toward primary elections amid inflation that eats into household purchasing power.
Public statements from PP representative Pilar Santos indicate they have not decided whether to appeal to the Constitutional Court. They say they lack details about the tax specifics and want time to study the particulars before deciding. Meanwhile, their group table signals a desire to refine the tax design as much as possible, without responding to questions from this newspaper about the stance of their party.
affect changes
Banks are actively seeking parliamentary support to push changes that would benefit the sector, such as maintaining a low income level that minimizes the minimum tax payable (roughly 800 million euros in 2019). If the tax base expands, more assets would be affected. The government would then have an estimated annual collection of around 1,500 million, with adjustments likely to keep contributions manageable for smaller institutions.
What seems most probable is that banks will await the Treasury’s initial settlement of the tax before considering any legal challenge in February. Organizations will then be able to appeal, arguing that the measure contravenes Magna Carta, and potentially request the judges refer the matter to the Constitutional Court. If the court accepts the case, the processing could take between six and eight years, according to financial sources.
double taxation
Legal teams in the sector are crafting arguments to block the measure as double taxation, questioning whether banks are being taxed twice for the same wealth creation. The tax would apply to the interest margin (the gap between loan interest and deposit costs) and commissions. These are two of the banks’ main income sources, alongside other items like loan losses and provisions. Corporate tax remains a separate line item on profit and loss statements.
To buttress their stance against double taxation, the government notes in the bill that the executive board acknowledges the need for the measure and cites constitutional provisions. The text frames the intervention as a necessary State action in the economy, aligning with constitutional principles of social contract and economic oversight. Banks counter that the measure effectively acts as a second tax on profits derived from salaries and capital, arguing this would be unfair and unconstitutional in many cases.
confiscated or not
Given the 2018 electricity generation tax precedent and other regional taxes, the question turns on whether the new lien respects constitutional limits on confiscation and economic capacity. The court would assess whether the tax aligns with the capacity to pay and does not overstep the State’s scope to auction wealth. Pedro Sanchez has defended the measure by pointing to Article 31.1 of the Constitution as a justification for the initiative.
Banks argue that the payment, together with corporate tax, would be too burdensome relative to their profits. The bill also anticipates total annual collections around 1,500 million euros, with projected dividends to shareholders. There is also debate over equality, as some smaller entities could be exempt or subject to different conditions, prompting concerns about competitive fairness.
embezzlement
Other legal arguments scrutinize how the measure is drafted to ensure it can be presented in court without triggering governance disputes. Critics warn of potential misuses of public funds and question whether the National Markets and Competition Commission is sufficiently vigilant about the impact on competition if some organizations shoulder the tax burden while others do not. The sector notes that major banks such as Santander, BBVA, CaixaBank, Sabadell, Bankinter, Unicaja, Ibercaja, Cajamar, Kutxabank, Abanca and BNP Paribas could be affected. CaixaBank and BBVA have estimated tax costs of around 400–450 million euros and 250 million euros per year respectively, with cumulative effects growing as rates rise in the latter half of the year. If the estimate holds, the top four banks would bear a substantial share of the targeted 1,500 million euro annual total.