The Spanish Supreme Court has made pig’s ear of the question of who should pay the Stamp Duty on new mortgages, but yesterday decided 15 to 13 in a plenary session of the disputes tribunal that borrowers should pay the tax, as they have done for the last 23 years, reversing a ruling on the 18th October by the same court that banks should pay.
So the decision is final. Borrowers must pay the Stamp Duty on all new mortgages, which could cost anything between €675 and €3,000 on a mortgage with a face value of €100,000, depending on the region where the loan is registered.
They decision is based on how the court interprets the law as it stands, but there is already talk of the Government changing the law to make lenders pay the tax, though of course the cost would simply be passed onto borrowers in higher interest charges or other costs. The relevant law is already under parliamentary review to bring it up to EU standards, so introducing the change would not be complicated, assuming parliamentary support.
The decision ends three weeks of legal chaos and uncertainty that has brought the Spanish Supreme Court into disrepute. Criticism of the way the court handled the matter is raining down from all sides. Banks are unhappy because it increases public animosity towards the banking industry, consumer associations have called the decision disgraceful, and leftwing firebrands like Pablo Iglesias and Alberto Garzón are calling for public demonstrations against the Supreme Court.
The bottom line is this: Borrowers will always pay the cost of Stamp Duty on new mortgages, whether they pay the tax itself or higher interest costs if the bank pays. So the Spanish Supreme Court has heaped opprobrium on itself for nothing. Another question entirely is how right is the law. I would argue the problem is the law itself, which penalises borrowers with yet another heft cost when they buy a home in Spain, regardless of who pays the tax.