Instituto de Estudios Económicos
Estudio preliminar sobre la adecuación a la Constitución y al Derecho Comunitario del gravamen temporal a entidades de crédito y establecimientos financieros de crédito

The new banking tax and the rule of law

The Institute of Economic Studies (IEE) published a report, elaborated by experts in financial and tax law, assessing the legality of the government's proposal to levy a temporary charge on the banking and energy sector. The report considers that the proposal, in addition to be considered a fraud of law, by eluding essential parliamentary procedures to approve a tax, presents serious problems from the constitutional point of view and violates basic aspects of the European Union (EU) law.

The report provides several legal comments on the deficiencies found in the government proposal, out of which we highlight the following:

  • The legal formula chosen by the government may be faster but it suffers from serious formal defects: According to the report, since it is a tax and not a " non-tax financial contribution to the State", the "Proposal Law" evades the due parliamentary procedure for the Government to exercise its right of legislative initiative: public consultation, regulatory impact review and a report by the Government’s Council of State, State, which would have occurred if it had been introduced as a “Government Bill” (Proyecto de Ley).

  • It suffers from serious technical defects that could violate the Spanish Constitution and the European Union legal framework. For example:
    -Disregards the prohibition of discrimination between residents and non-residents since it is expected to apply only to resident financial entities and not to subsidiaries of foreign entities.
    - It violates the principle of legal certainty by establishing the retroactivity of the charge to facts that occurred prior to both when it will take effect and the year it must be paid.
    - Disregards the regime for financing the Autonomous Regions and their participation in the collection of state taxes.

  • Regarding the concept of "windfall profits" in the banking sector, the report comments that it is difficult to speak of "extraordinary profits" in a sector characterized in recent years by its narrow margins and low return on equity even below than its cost of capital'. In addition, the government's proposal establishes a direct relationship between rate hikes and higher profits, ignoring relevant aspects such as the evolution of the demand of credit in a crisis scenario or the increase in non-performing loans, in addition to the relationship between profits and capital invested, which is what determines the profitability of an entity.

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