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Is Madrid a tax haven? Stop entering 900 million so as not to tax the great fortunes

Madrid

Updated: Wednesday, November 25, 2020 2:52 PM

Published on: 11/25/2020 2:44 PM

When we woke up, the property tax was still there. This is one of the conclusions of a debate which has become recurrent and which has become topical again due to the accusations by ERC that Madrid is a “tax haven” for not applying this tax, which mainly affects large fortunes.

The point of contention comes from the hand of the pre-agreement that ERC spokesman Gabriel Rufián announced on Tuesday, in which one of the points to be discussed was the creation of a bilateral committee between the Catalan Generalitat and the central executive for, literally, “To put an end to the de facto tax haven that the right has set up in Madrid and which is seriously damaging the working class, especially at this time.”

The statements angered Madrid President Isabel Díaz Ayuso, a staunch supporter of the elimination of the tribute, and who warned that it would become “anyone’s worst nightmare if they start hitting the pockets of the Madrid taxpayer. to pay for the corruption of the independence movement “.

Addressing LaSexta, the president assured: “It is a declaration of war. It is to say to the people of Madrid that they will pay more taxes to satisfy the separatists”.

What is inheritance tax?

Wealth tax is levied on the total value of assets held by a natural person. It is a tribute paid to autonomies and it is they who are in charge of its collection and management. This is important, because the money goes directly to the funds and to the autonomous budgets, their income is therefore essential to pay for the items that the communities take care of.

They can choose to set a minimum rate or even reduce it. This is the case of Madrid, which rewards him 100%, exempts him de facto in the community. This strategy benefits the region as it attracts large capital to settle and pay other taxes in the community, which decide to transfer their tax domicile to other communities.

Unfair competition?

This is where the so-called “ fiscal dumping ” comes in: other poorly funded communities that do not benefit from the “ capital effect ” enjoyed by Madrid denounce that they have less room to profit to large capitals with fiscal measures, which expels them from their territories.

But is there this fiscal dumping? In the opinion of the president of the union of financial technicians (Gestha), Carlos Cruzado, yes: “On the one hand, there is ‘dumping’. The capital effect is important: the income he derives from creation large companies, managers, executives … and because of its centralization, the state administration makes it important in the Community of Madrid, ”says Cruzado.

While this capital is gaining in relevance, the Community has reduced this regional tax to 100%: only 14,000 Madrid residents benefit from this exemption, for which the Madrid funds stop collecting around 900 million euros each year.

“While the community has reduced this tax, the debt has increased”, denounces the president of the financial technicians. “It seems incongruous to us that this fiscal co-responsibility is not assumed,” he said.

What does this harmonization consist of? Basically, by establishing minimum and maximum contribution rates, so that no community, as Madrid does, can exempt itself from paying this tax and put itself in an advantageous situation compared to others because it has more resources.

Diabolical regional funding

The wealth tax is the result of the autonomous financing reform, which expired in 2014 and which the Ministry of Finance has set as a priority objective of the legislator. In fact, before the pandemic struck, the Valencians of Compromís demanded that the government present the reform in eight months, as the current distribution mainly affects the community.

From the government, the first vice-president, Carmen Calvo, insisted on what the Minister of Finance, María Jesús Montero, has previously commented: “The Treasury has been talking for a long time about tax harmonization. Equal rights and respect are important freedoms. We are at the beginning of some important decisions which assure the Spaniards that their tax situation cannot be asymmetrical. “

“We expressed the need to harmonize to a certain extent the ceded taxes, while respecting a certain margin of autonomy for the communities”, recognizes Cruzado.

At the moment, the situation greatly benefits Madrid: according to wealth tax statistics, cited by Cruzado, of those taxpayers over 30 million euros, the maximum level, 60% are in Madrid. Of those who charge over $ 6 million, 50% are taxed in the region.

Cannot be changed with PGE

The current reform cannot be done by means of the finance law because of a legal problem: the regional finance law is an organic law, which requires reinforced majorities, and a normal law cannot modify it.

At the moment, the situation looks complicated, as there are too many interests in the so-called regional taxation in which it will be difficult for all interested parties in the Fiscal and Financial Policy Council to be satisfied.

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