Bank Tax, Another Twist

The President of the Government recently announced within the framework of the State of the Nation Debate the creation of a bank tax aimed at collecting €3 billion in 2023 and 2024. The specific tax figure through which its implementation will occur is still unknown; however, it must comply with the constitutional principles governing our tax law, particularly the principles of equality and economic capacity. Regardless of the lack of timing to establish this tax in the current economic situation, I would like to refer to some figures regarding the tax burden that CECA financial institutions bear and the fiscal particularities that the entire Spanish financial sector, in general, faces. Considering the results published in studies conducted by consulting firms PwC and KPMG on the tax contribution of the CECA Sector for the years 2016 to 2020, we can see that the taxes borne (which represent a cost for the entities and affect their income statement) have evolved from €2.255 billion in 2016 to €2.619 billion in 2020 (an increase of 16%). Specifically, these taxes account for 53.32% of the results obtained by these entities, meaning that of every €100 in profits, €53.32 was allocated directly to the payment of taxes. This percentage rises to 60.82% when accounting for contributions to regulatory funds, which I will refer to later. Furthermore, banks have their own taxation. Since 2015, there has been a surcharge on banks in the Corporate Tax, as a higher rate of 30% applies to them, while the general rate applicable to other sectors is 25%. However, the tax particularities of the sector are not limited solely to the Corporate Tax. Specific reference must be made to VAT – which represents a non-recoverable cost for this sector – and other taxes that fall on banks.

More Specific Taxes
Since 2013, the financial sector has had a specific tax known as the Deposit Tax (Idec), which levies a 0.03% tax on deposits made in credit institutions throughout Spain. This tax has remained in place in recent years, despite the paradox that interest rates were negative within the European context. In 2018, following various jurisprudential fluctuations from the Supreme Court regarding who should bear the commonly referred to “mortgage tax,” the Government resolved through a Royal Decree that credit institutions should bear the said tax. This regulatory change was accompanied by a measure in the Corporate Tax that limited the deductibility of the tax paid, despite being clearly a necessary expense for carrying out their activity. In 2020, Spain decided to unilaterally establish a domestic Financial Transactions Tax of 0.02% on acquisitions of publicly traded Spanish securities with a capitalization exceeding €1 billion, despite the fact that the European initiative for establishing this tax did not prosper. Aside from these taxes, from a regulatory viewpoint, the financial sector must also face other types of contributions to manage the risks of the financial system with minimal costs to the taxpayer, investors, and the real economy (Deposit Guarantee Fund and Single Resolution Fund) which, despite not having a tax nature, constitute an operational cost that does not exist in other sectors.

At a Disadvantage Compared to Europe
Finally, it should be noted that the principle of legal certainty in tax matters requires that regulations do not undergo constant revision, so that economic operators and investors have a minimum level of certainty when making decisions regarding their resources. Experience has shown that establishing such measures creates insecurity among international investors, leading to capital movements toward other jurisdictions with greater legal certainty. This situation would hinder the financing of Spanish companies at a time like the present, especially when the establishment of such measures lacks harmonization at the European level, which would place our financial sector at a clear disadvantage compared to its European competitors in a single banking market context.