Spain's Government Faces Crucial Vote on Tax Measures Amid Opposition and Negotiations
The Government of Spain is bracing for a critical vote in the Congress of Deputies this Thursday concerning its proposed tax measures. This package includes a minimum tax rate of 15% for multinational corporations, a two-point increase in personal income tax for capital incomes exceeding 300,000 euros, and higher taxes on tobacco. However, these measures face potential derailment due to Podemos' firm stance to oppose them unless a guarantee is provided for a one-year extension of the tax on energy companies.
This recent agreement was reached between the Government and several parties, including ERC, Bildu, and BNG, but it would also require the approval of Junts and PNV who have publicly rejected any new taxes targeting companies within those sectors. Podemos has consistently advocated for the permanence of these additional taxes, initially introduced in 2022 to stabilize the economy amid the fallout from the ongoing conflict in Ukraine.
The temporary tax on banks levies 48% on the interest and commissions accrued by banking entities with revenues exceeding 800 million euros. Meanwhile, the energy tax targets 12% of the revenue of companies in that sector with earnings over 1 billion euros, excluding income from regulated activities. Data from the Ministry of Finance indicates these taxes have generated a total of 5.767 billion euros for the state, with contributions of 2.908 billion in 2023 and 2.859 billion in 2024.
While maintaining both taxes was part of the PSOE and Sumar action plan, pressures from companies in these sectors, who are threatening to withdraw investments, have led PNV and Junts to oppose them. This internal division among the coalition partners has resulted in prolonged negotiations, evident from the meetings taking place within the Finance Commission of Congress. Due to disagreements, the session ran well into the early morning with numerous breaks and considerable confusion among deputies regarding the voting process due to various proposed amendments.
A notable twist occurred when ERC, EH Bildu, and BNG announced an agreement with the Government just before midnight, which could facilitate the approval of the bank tax in Thursday's plenary session. This agreement, however, requires a subsequent endorsement to extend the levy on large energy companies for an additional year. The coalition garnered 19 votes in favor, including PSOE, Sumar, ERC, Bildu, PNV, Junts, and BNG, while 17 votes stood against it from PP and Vox. Interestingly, Junts decided unexpectedly to support the package, although they reiterated their opposition to any tax on energy companies.
The spokesperson for Junts defended that the agreement only applies to energy companies that do not invest in decarbonization, potentially excluding many from the impact of the tax. As the plenary session approaches, the fate of the banking tax and the broader fiscal measures is contingent upon further negotiations with PNV and Junts, as well as ensuring Podemos' support. Ione Belarra’s party has drawn a line, insisting that the Executive must guarantee support from the two parties; otherwise, their four deputies will either vote against or abstain, setting the stage for a tied vote which would lead to the collapse of the measures.
Podemos sources have expressed skepticism about the agreement's viability, stating that without PNV and Junts' votes, any extension simply cannot proceed. Although they were approached Monday night with a proposal for the extension, they opted not to align after recognizing the Government's lack of necessary votes. Despite this, the Socialist Party remains optimistic about bringing Junts and Podemos together, suggesting that different treatments might be needed based on how companies allocate their profits - whether for shareholder distribution or significant investments in decarbonization.
In summary, the Government’s ability to navigate this treacherous political landscape before Thursday's vote will be pivotal in determining the future of its tax measures and reflects the complexities of coalition governance in Spain.
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