Spain Seeks ‘Tax Justice’ From Large Companies

Trust Bloomberg Tax for the international news and analysis to navigate the complex tax treaty networks and global business regulations.

By Brett Allan King

Spain’s Socialist Prime Minister Pedro Sanchez has laid out a tax policy July 17 that cracks down on corporations’ use of deductions which allow them to enjoy lower tax rates.

The government will also present a bill to end tax amnesty programs that allow individuals or companies to disclose foreign assets and avoid penalties, crack down on tax fraud, update the list of countries Spain considers tax havens, and establish joint liability on tax debtor lists, Sánchez said.

His parliamentary address comes more than a month after taking power following a no-confidence vote.

Spain’s general corporation tax rate is 25 percent, but Sánchez said the government would set in place a stricter regime to ensure companies pay at least 15 percent, and keep them from using deductions to obtain an even lower rate.

“The new government is aware that there will be no social justice without tax justice,” Sánchez told parliament.

The approach goes “one step further” in the direction of the previous government, which tried to eliminate tax deductions and rebates and bring the effective corporate tax rate closer to the nominal rate, said José María Echeverría-Torres, a partner at Cuatrecasas in Madrid.

Still, there are actually not many deductions or exemptions left to cut, and the main area of interest to businesses would be “matters relating to double taxation,” he said.

Ending Tax Amnesty

Echeverría-Torres also said a future government could reverse the ban on tax amnesty programs.

“My understanding is that with any law that is approved now, a future government with the will for a new tax amnesty could come along and annul it or modify it,” Echeverría-Torres said.

Spain’s Constitutional Court in June 2017 nullified a previous tax amnesty program which the government had approved in 2012.

Governing Environment

Sánchez became prime minister after the ouster of the minority conservative Popular Party government in a June 1 parliamentary no-confidence vote.

Far from a parliamentary majority, his Spanish Socialist Workers’ Party will likely have to rely on the votes of the leftist Podemos Party and a long list of smaller nationalist parties to pass bills. While the former conservative minority government was constantly at odds with the parliament, Sánchez said he is committed to working with the parliamentary majority.

“We have come to govern with Spaniards, and from there my commitment to govern with the parliament and not against the parliament, as the case has been in recent years,” Sánchez said in his remarks.

In additon to criticism from the right, Sánchez faced questions from the leftist group he will need to pass many laws.

Ione Belarra, deputy for the Unidos Podemos group, demanded in parliamentary debate July 17 that Sánchez make good on his earlier promise and “publish the list of defrauders of the Popular Party’s unconstitutional tax amnesty.”

To contact the reporter on this Brett Allan King in Madrid at correspondents@bloomberglaw.com

To contact the editor on this story: Penny Sukhraj at psukhraj@bloombergtax.com

Copyright © 2018 The Bureau of National Affairs, Inc. All Rights Reserved.

Request International Tax