Raymundo Larraín NesbittLawyer Raymundo Larrain provides us some insights on the positive taxation changes that may take place shortly after Spain’s new general elections on the 23rd of July 2023.
As long-time SPI readers will recall, we published a scathing article on Spain’s new second wealth tax back in November 2022 (Impuesto Temporal de Solidaridad a las Grandes Fortunas, or ITSGF for short). In this article, we explained how this tax had been introduced only for political reasons and that it was more about firing up the base than collecting taxes.
As is logical, and as was forewarned, this new law has proved over time hugely detrimental for foreign investments, keeping HNWIs from acquiring high-end property in Spain and establishing themselves in the country permanently out of fear of high taxation. This new second wealth tax would affect all those taxpayers with €3,700,000, or more. Several regions in Spain had in fact suppressed wealth tax (such as Andalusia, Madrid, Galicia, etc) but the new second wealth tax overrides devolved regional competencies in a political move straight out of Maduro’s playbook.
But behind every dark cloud, there is a silver lining.
As El Confidencial economic newspaper publishes, the landslide victory of last 28th of May, in both regional and local elections, for Spain’s centre-right-wing Partido Popular, which pulverized Spain’s sitting left-wing government and wiped its junior communist political ally (Podemos) off the political map opens the door to changes. The poll results have also greatly weakened the government’s unconditional political allies (communists, nationalists, and rebranded terrorists) which has left the door ajar for change.
The upcoming general elections next 23rd of July 2023, which are being called five months ahead of time, are an opportunity to amend, and even repeal the slew of new tax laws that were sneakily and hastily introduced by Spain’s coalition government last December 2022, including the new wealth tax or ITSGF.
Although it’s true that the standard timeframe of 5 to 6 months to approve a new law is somewhat tight before this year’s end so see this happening, it can still be done if will and hard work is put into it. Furthermore, the incumbent government has proven adept at bypassing Congress’ supervision on approving dozens of executive laws, devised to circumvent constitutionally established legal procedures of checks and balances that behove healthy democracies, to approve within only a couple of months new sets of laws. A new government could take a cue of this and repeal the new tax on banks, the new (state) wealth tax, the new tax on utility companies, new pro-squatter laws, new rental laws with state fixed prices, etc all within 1 or 2 months.
Bottom line, as the Chinese like to point out, with crisis comes opportunity. And the opportunity that now opens up for a newly democratically elected government next month, is to repeal all these tax laws within only a couple of months, that greatly harm employment in Spain (the country in the EU, and out of all the OECD, with the highest unemployment levels), deter foreign investments, and tarnish Spain’s reputation as a free-market economy.
The general elections of next 23rd of July will prove key; they are a golden opportunity that needs to be seized by a newly elected government to deliver a clear and loud message to investors and markets alike that Spain is, once more, open for business.
Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. Ní neart go cur le chéile. VOV.
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