Government Finalizes Controversial Fiscal Package with New Taxes on Energy and Banks
In a last-minute decision, the Government has green-lighted a fiscal package following a challenging negotiation with Podemos. The approved measures will entail a new tax targeting energy companies, set to be ratified by the Council of Ministers and later approved by the investiture bloc. This negotiation was not just limited to energy taxation; it also encompassed the introduction of a tax on banks while rejecting proposals for increased diesel taxation. The Ministry of Finance's initiative to equalize the VAT on diesel to that of gasoline faced opposition from the Popular Party (PP), Vox, and Podemos.
The proposed amendments formed part of a broader set of proposals from the ruling Socialist Workers' Party (PSOE), many of which did not garner the necessary support during a recent Finance Committee meeting. The vote saw factions such as Sumar, ERC, Junts, Bildu, and PNV backing some measures, while BNG chose to abstain. Among the key proposals that failed to pass were an increase in VAT for tourist apartments to 21% and the removal of favorable tax conditions for socimis, which manage real estate assets.
A notable aspect of the newly imposed bank tax will be its temporary nature, lasting three years. It will target the interest margin and fees of financial entities, applying a scaling structure ranging from 1% to 7% based on earnings. Collected revenues from this tax are earmarked to bolster the autonomous financing system, enhancing local government funding.
Another significant change involves the introduction of a minimum tax of 15% aimed at multinational corporations. This complementary tax will ensure that both multinational and national companies with revenues exceeding 750 million are subject to at least 15% tax on their adjusted accounting results.
On the other hand, small and medium-sized enterprises (SMEs) will benefit from gradual reductions in their tax burdens. By 2027, SMEs will see their taxation rate decrease to 20%, and a special reduced rate of 17% will be implemented for the first 50,000 in profits.
Additionally, personal income tax for high earners is set to increase by 2%, rising to 30% for those with incomes exceeding 300,000. In a bid to target specific markets, a special tax will also be introduced for vaping products and nicotine pouches, responding to the rising trend in nicotine consumption among younger demographics.
Other approved measures include bonuses to support sports clubs hiring monitors for youth training and initiatives aimed at combating fraud in the hydrocarbons sector. Moreover, deductions are anticipated for businesses engaging in recapitalization efforts.
This comprehensive fiscal package aims to address both social equity and economic support but has already sparked debate among various political factions and the public regarding its long-term implications on businesses and citizens.
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