Multinational Tax Law at Risk as Final Votes Loom in Congress
The European Union's multinational tax law, part of the fiscal package announced by the Government, faces critical final votes in Congress this Thursday. However, the fate of this legislation remains uncertain, with significant portions of its wording still unresolved and Podemos threatening to oppose it, potentially derailing the entire project.
Having passed through the Finance Committee, which extended beyond seven hours to secure necessary support, the law now moves to the plenary session. Yet, there is unease regarding its approval, reflecting the precarious nature of government backing. Currently, the proposal omits the taxes on banks and energy companies, which have been insisted upon by Sumar, Podemos, ERC, Bildu, and BNG.
To navigate committee approval, the PSOE (Spanish Socialist Workers' Party) promised ERC, BNG, and EH Bildu a commitment to attempt to pass the bank tax through a transactional amendment, alongside the contentious energy company tax which the government had previously agreed to let expire by year-end. In response to pressure, the Ministry of Finance stated that they would extend the energy company tax via decree for one more year, yet maintained their agreement with Junts, indicating that energy companies which invest in decarbonization would remain untaxed.
This contradiction has raised concerns among coalition parties. Patxi López, the socialist spokesperson, claimed compatibility in having a bank tax while exempting companies investing in green initiatives. Meanwhile, ERC's Gabriel Rufián has pressed the Government to expedite the decree law regarding the energy tax, setting a deadline for clarity ahead of the plenary. In contrast, Bildu’s Oskar Matute expressed confidence in a verbal agreement with the Government, vowing support for the law.
The PNV (Basque Nationalist Party) appears to be a steadfast supporter, having successfully pushed through amendments to tackle hydrocarbon fraud. Conversely, Junts expresses satisfaction with the fiscal agreement outcomes but has previously changed its vote at the last moment, raising additional uncertainties.
Central to the vote outcome is Podemos, which currently maintains a firm 'no' stance until a proposal to extend the energy tax is presented. A negative vote from Podemos could lead to a tie of 175 votes between the supporting bloc and opposition parties including PP (People’s Party), Vox, UPN, and Podemos. Such a stalemate would trigger Article 881 of Congressional regulations, effectively leading to the bill's defeat if repeated ties occur.
With this looming vote, significant negotiations are expected as the Government attempts to secure the continuation of the law—learning from past experiences where previous proposals on unemployment benefits and budget deficits fell through due to coalition disagreements.
The PSOE will also strive to introduce amendments related to taxing vapers, imposing VAT on short-term rental housing, enhancing taxation on artists, and reforming Corporate Tax regulations in light of Constitutional Court rulings. Despite some victories in committee, they face considerable hurdles ahead, notably in solidifying their agreement with Junts regarding bank taxation. Moreover, Sumar will advocate for higher taxes on Listed Real Estate Investment Companies, elimination of private health insurance tax exemptions, and taxation on luxury items.
Ultimately, the outcomes of initial amendment votes in the plenary will critically influence coalition partners’ voting alignments. A successful bank taxation could sway ERC, Bildu, and BNG to retain their support, while failure to reach consensus might alienate these allies. It remains to be seen if Podemos will reconsider its opposition, as the stakes for the Government are undeniably high.
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