Wealth Tax – Update – Just when you thought Spain was moving in the right direction…


In response to Andalucia getting rid of its odious wealth tax, Murcia was making noises to do this as well and we had that feeling that despite the enormous economic challenges caused by Putin and others, Spain would see an influx of optimism, new capital, entrepreneurial excellence, new sources of well paid employment, modernist influences, reductions in the crazy levels of unemployment and all the other good things that happen.

It felt good……………………..for a few days

Until, Unidas Podemos and their PSOE friends, made an announcement. You see their mission in life, it seems, is to tax everything as much as possible, redistribute all the money they can via their own ministries and according to their own system and encourage as many people as possible to be dependant on the state in order to make them popular. They see Wealth Tax as being an important tool in their arsenal, despite the fact that in reality it raises a tiny amount of tax each year. All it actually does is push people out of the country. M. Hollande tried this in 2016 and managed to irritate the wealthy so much that they just left France for countries like the UK, Portugal and even Russia. M. Macron eliminated the tax in 2018 because it caused a significant overall reduction in tax revenues.

Anyway back to Spain. The Government had to do something. Soooooo…

Wait for it…

“We’ll invent a new tax. Yes that’s the right way to go. We’ll call it something that makes the average voter believe its a wonderful thing… ummm, let me think for a minute, I know,lets call it “The Tax on The Big Fortunes”. Wow! That sounds good!”

“This absolutely sounds like a completely new tax. The word Wealth doesn’t even appear in the title. That will fool the capitalists.”

Great wheeze, as the Brits of my generation might say.

Who announced this fantastically clever idea?

Well surprise, surprise, it was María Jésus Montero, performing just like a fifth grade magician.

Ta daaa!

Extracted from Eduardo Segovia‘s excellent OK diario article

This lady is obviously a master of macro-economic thinking (??), having achieved a totally irrelevant degree from Seville University of Medicine and Surgery. She is the appointee of the Unidas Podemos party, with its alleged close affiliations to Venzuela.

She presided over the finances of Andalucia between 2013 and 2018, until she and her left wing friends were thrown out, some of whom have since been prosecuted and are currently spending time in a Government holiday camp for the fraudulent diversion of unemployment subsidies. In 2018, the Andalucian voters, after more than 40 years of dreary socialism, got rid of them, having finally had enough of promises and no delivery.

You must ask yourself how can she now be the head of the Ministero de Hacienda (the ministry that runs the finances of the whole country)? Indeed how can she and Yolanda Díaz, also of Unidas Podemos , the minister responsible for labour law and social security, have the most economically important ministerial positions in the Spanish central Government, given that most of the other ministries are about as important as being in charge of organising school buses?

This question must absolutely be asked when you know the facts about the level of support they have in the country:

  • Unidas Podemos gained only 33 out of 350 representatives in the National Parliament Congress, and
  • Unidas Podemos gained precisely ZERO of the 265 representatives in the National Parliament Senate

So how did they secure such critical ministries in 2018? How is it that they have not since been thrown out?

This is a tribute to the desperation of the PSOE party, headed up by Prime Minister Pedro Sanchez, to gain and hang on to power. Instead of going back to the voters for another election to ensure a real mandate to govern the country.

Such is the danger of Spain’s proportional representation system that allows minorities so much electoral weight.

And even then, the PSOE and Unidas Podemos coalition did not have an outright majority and has to constantly rely on sneaky, hidden side deals with all sorts of flaky regional parties who constantly use the weakness of the ruling coalition to extract concessions.

It is said that many countries do well in spite of their Governments. All considered, Spain is not doing badly and is a great place to live, so it seems that the Spanish people manage well enough, no doubt due to the drive and ambition of many of them. Still, it would be nice if the Government was not fighting in the opposite direction, just to satisfy its political dogma.

Moving on, lets analyse the Wealth Tax situation for what it really is and what may happen in due course:

  1. We know that the PSOE/Unidas Podemos coalition, hangs by a thread. The chances of them managing to agree about anything substantial like proper laws to deal with Wealth Tax, is highly dubious. Even if they could agree, the parliamentary process to pass such a law would take many, many months and there just is not enough time to do it this year.
  2. Arguably, it is legally impossible for Spain to have two taxes charging tax on the same ‘hecho imponible’, i.e. taxable event. This means that the existing Impuesto sobre el Patrimonio would have to be wholly eliminated from the statute book, i.e. the law would have to be finally derogated. So far, national and regional Governments have used the simple mechanism of granting a 100% allowance to achieve the elimination of the tax. Comment 1 also applies to the process of derogation of an existing tax law.
  3. A completely new tax cannot be introduced using the 2023 annual national budget legislation. In the past, introducing a new tax law in the budget has been shown to be impossible.
  4. Although the Government can introduce a new tax by Decree (i.e. avoiding an Act of Parliament) it can only do so lawfully in limited situations, like in the case of a genuine emergency. This legal scam has been often used by Governments of all persuasions, but, ultimately, all the other disagreeing political parties put the boot in hard and quickly, challenging in the constitutional court the validity of such ’emergency’ law. The Government usually loses, as it did when the police had to refund fines charged to millions of people who had the temerity to walk outside their homes to get a breath of fresh air during the Covid19 crisis. It is hard to believe today but the authorities even required the police to fine people on beaches who refused to wear masks. It was surreal but this has since, thankfully, been declared illegal.
  5. Interfering with the way that Wealth Tax works, even replacing the tax with some newly named nationally controlled concoction, affects how the Autonomous Communities are financed. Such changes would be constitutionally very fundamental and could not be achieved without a real majority in Congress and the Senate.

The few comments that have emerged from Government indicate that 4 is the way they see they can achieve their objective, i.e. the Government knows it does not have a legal mandate to change the law properly so it will ram the change through using its executive powers.

Even if they try this it is not at all certain that the Government will succeed. The opposition parties are well briefed, funded and lawyered up and ready to attack the Government .

This is no way to run a country.

Citizens, foreigners and investors in the country cannot plan anything whilst such uncertainty exists. That Spanish Constitutional law permits such nonsense is obviously a mistake that needs correcting but it is exceedingly difficult to change the Constitution and so we are left with the often politically biased, confused and contradictory interpretations of the Supreme and Constitutional Courts; that is when they can get around to ruling on such matters.

Joseph de Maistre, the Savoyard philosopher is quoted as having written in 1811 “Every nation gets the government it deserves” but I do not think that the people of Spain deserve this parody of a Government.

Let’s hope that the next Spanish national elections, that will take place no later than 10 December 2023 and hopefully many months before, will consign to the bin this particular batch of left wing politicians, made up of PSOE, Unidas Podemos and their minority friends.

Let’s also hope that the next Government has sufficient majority to drive through sweeping reforms that are so needed, to give Spain the dynamic economy that it deserves, for the good of all its people.

In the meantime, can we guarantee that Wealth Tax is gone forever in Andalucia?

No, but it will almost certainly be zero for Andalucia and Madrid for 2022, Murcia hopefully too. As for 2023 onwards, I am a natural optimist and I think the Spanish people have had enough of this Government and the centre right Partido Popular will take over before the end of 2023 with a sufficient majority to finally and immediately eliminate Wealth Tax completely, so that for 2023 onwards Spain will be free of this cursed tax.

Watch this space as we will be publishing updates on this subject as it happens.

Spence Clarke specialises in the provision of Spanish tax, accounts, law and labour services, mainly to foreigners with interests in Spain. Our cross-border knowledge helps clients adapt to the Spanish system with the minimum of doubt and disruption. If you have any questions about this article or any other matter contact us, with no obligation, to see how we can help you.