Revised analysis of Spain’s banking, energy, and wealth taxes in Parliament

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The chamber approved the measure with 139 senators voting in favor, 107 against, and 12 abstentions. With the Upper House completing its deliberation and no amendments forwarded back to the Congress of Deputies, the norm is slated to take effect the following day. The decision was published in the Official State Gazette (BOE).

The bill underwent several changes during its passage through the Congress of Deputies. A key modification centered on the 4.8% tax on bank interest and commissions, a proposal initially presented by the Basque Nationalist Party (PNV) that was ultimately incorporated so that banks operating in Spain would be subject to the tax.

As a result, the nationality of banks was no longer specified. Consequently, the Socialists (PSOE) and Podemos did not deem it necessary to enumerate in the articles or the explanatory statement which foreign institutions active in Spain would be affected. If it is clarified that foreign banks doing business in Spain are also taxed, parliamentary sources cited by Europa Press indicate this could apply to those entities as well.

Energy tax squeezes regulated income

Regarding the energy tax, income from regulated activities will be excluded from taxable billing. The text was revised so that the tax does not apply to revenues where supply operates under a regulated price, such as the price rate of last resort for gas, bottled LPG, and tubular LPG, as in the case of PVPC for electricity.

The exemption also covers regulated revenues from electricity and natural gas transmission and distribution networks, and, for generation with regulated pricing and surcharges in non-peninsula regions, all revenues from facilities, including those arising from the market and, in turn, from economic dispatch.

Additionally, another adjustment established that the tax will apply only to activities carried out by companies within Spain.

It will be evaluated whether the taxes are permanent

When new taxes on banking, energy, and large fortunes expire, the government intends to review whether their application can be made permanent through a formal evaluation process.

For the wealth tax, the aim is to tax assets exceeding three million euros so that they do not escape regional government incentives.

The tax rates are structured as follows: 1.7% on assets between 3 and 5.3 million euros; 2.1% on assets between 5.3 and 10.6 million euros; and 3.5% on assets above 10.6 million euros.

Moreover, the rules in the wealth tax law will determine the taxable base of this levy, introducing a minimum exemption deduction of 700,000 euros.

It should be noted that the Treasury aims to collect these taxes starting in 2023 and to incorporate them into 2024 figures, taking into account 2022 revenues and considering ongoing assessment of applicability.

AKP warns against fraud

The Senate’s People’s Group moved to veto the bill. With the new taxes rejected in the Upper House, they argued that the proposal, encompassing three new levies, represents a legislative maneuver designed to deceive public scrutiny and sidestep standard procedures.

Legislative fraud, they contend, occurs when a bill is repeatedly presented as a carefully crafted government project and rushed through emergency procedures. They allege that the Popular Party (PP) bypassed essential legality checks and failed to conduct mandatory public consultations and disclosures.

PP also contends that it is procedural fraud for the measure to be debated in the Economic Affairs and Digital Transformation Commission rather than the Treasury and Public Functions Commission.

One spokesperson claimed, with a touch of drama, that this is a substantial political fraud, framed as a conflict between the poor and the rich, masking how the government’s large revenue is allocated. This criticism came from the party’s bloc in the Senate.

Ciudadanos representatives argued that the current bill, which seeks to authorize extraordinary and temporarily limited individual taxes on energy and banking sectors, has strayed far from what the European Commission proposed as reasonable parameters.

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