Mini-Fiscal Reform Roadmap
Spain’s government unveiled a plan described by Prime Minister Pedro Sánchez during a trip to India, outlining a sequence of steps for the weeks ahead. The strategy centers on tax changes first, followed by spending decisions and the General State Budgets in the near future.
The first move is expected to occur this Wednesday. Government sources say the administration, working with parliamentary blocs of the Socialist Party and Sumar, is negotiating late into the day to present a small set of amendments to a tax bill currently in progress, one that would guarantee a global minimum corporate tax of 15 percent for multinationals.
In this mini-reform, the government would transform the current temporary levies on banks and energy companies into permanent taxes, among other changes. Officials stress that the package will only be tabled if there is a credible guarantee of securing the votes required to pass it, drawing support from parties including Podemos, Junts, ERC, and PNV, among others. Junts has expressed opposition to the energy levy after Repsol threatened to shift investments from Tarragona to Portugal.
As a result, negotiations intensified as the countdown continued (the deadline to file partial amendments to the cited bill is October 30 at 18:00). Official sources note that if a broad agreement is not reached at the last moment, the government may resort to another vehicle, such as a different bill in progress that can receive amendments or a decree law. Either path would aim to secure approval before December 31, when the current temporary levies expire; these levies in 2024 provided 2.859 billion to the public coffers.
“We are aware that a parliamentary majority is needed to advance the new taxes. That is why we are trying to build consensus around these two measures,” said the economy minister, Carlos Cuerpo, at a press conference after the Council of Ministers. He argued that the balanced design of the existing extraordinary levies on banks and energy companies has allowed higher revenue to finance the government’s social shield against inflation while delivering record-level benefits to firms in both sectors. He noted that the design of the new taxes would be calibrated to the investment needs of the energy sector and to the evolving interest-rate environment to avoid deterring investment, as the affected companies have warned.
Mini-Reform
The aim of the tax amendment package is to deliver, in 2025, additional revenue equal to 0.3 percent of GDP, roughly 4.5 billion euros, as Spain pledged to Brussels in its Fiscal and Structural Plan 2025-2028 submitted on October 15. Moreover, this package of changes is intended to unlock the fifth tranche of European funds (10 billion euros) before year-end.
Thus, this “mini-reform” envisions not only cementing permanent taxes on banks and energy firms, but also delivering that extra 0.3 percent of GDP through removing energy and food tax reliefs and by introducing new tax measures yet to be defined by the government, which Sánchez has previously mentioned. The report also mentioned nicotine taxes for vaping products as a possibility.
The bill proposing a 15 percent minimum tax for groups of multinationals was presented to the Congress on June 6, with urgency requested in the Finance Committee. Since June, the deadline for amendments has been extended several times and now closes on October 30. It is the sole tax-related bill under consideration in Congress and has been used as a catch-all vehicle for the government’s fiscal agenda.