Fiscal Abuses: Government Discriminates Against Companies for Ideological Reasons

sanchez elections

Aurelio Medel (5 Días) | In Spain, Parliament remains trapped by the whims of minor parties that support Pedro Sánchez’s Government, putting him in the position of either adopting their clientelist interests or renouncing to govern. The political negotiation regarding the tax on banks and energy companies, sectors that have historically been attributed with the greatest capacity for influence in Spain, is a vivid portrait of the blackmail from these minor parties. The PSOE and Sumar signed a government agreement that states, in its Point 8 (A fair taxation adapted to the challenges of the present): “We will review the taxes on banking and energy companies with the aim of readapting and maintaining them once their current application period expires.”

That moment has arrived, and the PSOE-Sumar coalition cannot advance what they agreed upon and included in their electoral programs because the reality is that they no longer even count on the 152 MPs they had when they signed that agreement. In less than a year, the socialists have “lost” José Luis Ábalos, and their partners have lost the four seats from Podemos. They still need the support of the other parties that backed Sánchez in the investiture: the 14 deputies from Catalan independence (seven from ERC and seven from Junts) and the eleven that add up to Basque nationalism (five from the PNV) and independence (six from Bildu). Only in this way do they exceed the 176 votes that provide an absolute majority.

To garner simultaneous support from Sumar and Podemos, who are engaged in a fratricidal war; from the two parties of Catalan independence, which have found nothing to unite them since they forced the government to accept amnesty; and from the two Basque formations, which fight over every farmhouse to lead the Basque Country, is the greatest Sudoku that a government has faced since the arrival of democracy. This is the ideal scenario for lobbyists, who legitimately defend the interests of their clients, from shareholders of the companies they represent. The problem is that politicians forget that their duty is to defend the general interest, as demonstrated by the aforementioned tax.

The special levy on energy companies and banks was born in 2022 as a response from the Prime Minister, Pedro Sánchez, following the failure in the Andalusian elections, where the PP won an absolute majority. This extraordinary and temporary tax (2023 and 2024) was introduced under the argument that both sectors were making enormous profits due to rising energy prices and interest rates. Now it was time to ‘review’ and ‘maintain’ this levy, as stated in the agreement between PSOE and Sumar, and the government is banking on it being extended, despite the fact that the arguments justifying its creation have become obsolete due to the sharp decline in oil prices and money costs, with Euribor below what it was when it came into effect.

The negotiation of this tax, the end of which is impossible to predict, started poorly. On October 30, PSOE, Junts, and PNV reached an agreement that exempts the energy sector from the extension of the special tax and leaves it exclusively to the banks, with some minor modifications that do not change the essence of the absurdity of a tax that levies income, not profits, and targets specific sectors. What had happened for PSOE to reach an agreement with its right-wing parliamentary partners before negotiating with Sumar, its government partner, and violate what they had previously agreed upon? On October 22, the CEO of Repsol, Josu Jon Imaz, published an article in La Vanguardia and El Correo (Catalonia and the Basque Country), titled Industry or Populism, in which he warned that ‘penalizing this activity with a discriminatory tax makes it impossible for that investment to be carried out,’ referring to the plans he has in Spain, with an indirect reference to the industrial hubs he has in Tarragona and Somorrostro (Bizkaia). Imaz defends taxes and protests against the abuses.

On Monday (November. 11), the PSOE and Sumar signed their agreement on this tax, in which the latter agreed to exempt energy companies in exchange for dismantling the tax system for REITs and imposing a 21% VAT on tourist apartments. On Tuesday, El País published that Junts is trying to sneak in a specific amendment so that CaixaBank can deduct from the aforementioned tax the dividend it pays to its main shareholder, the La Caixa Foundation.

Yesterday, (November, 14) the Government postponed the vote on the new tax to Monday due to a lack of support. In short, the negotiation is not progressing because the Executive is making a mistake by trying to construct taxes from an ideological bias, stigmatizing some sectors over others, as if there were good and bad companies, which opens up opportunities for despicable dealings. If the State’s accounts need greater revenue to meet its expenses, raise the corporate tax for all companies, sell mortgages or pants. Then, demonstrate your natural political preferences with the allocation of the revenue. Leading a Government means earning respect through rigor and reason, but if you settle into pure ideology, your partners lose respect for you and start to see the BOE as the catalog of the Three Wise Men for their friends.

About the Author

The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.