MADRID: Spain’s minority Popular Party (PP) government is in preliminary talks with the center-right party Ciudadanos about the possibility of beefing up the country’s corporate tax regime, sources have told EL PAÍS. With Spain’s tax coffers in bad shape and Brussels demanding €5.5 billion in cuts to reduce the country’s structural deficit, the two parties are thrashing out ways to bring in some much-needed revenue.
But with Prime Minister Mariano Rajoy and Economy Minister Luis de Guindos insisting the government will not increase sales tax (VAT) or income tax, it is the corporate tax rate – currently set at 25% – that has come under the spotlight. Therefore, maximum tax collection for minimum political damage is the order of the day.
Spain’s corporate tax rate, which differs depending on the type of business, has seen the gap between company profits and tax paid spiraling upwards through the country’s crisis. In 2007, Spain raked in €44 billion in corporate tax, or 4.1% of GDP. By 2015, however, company tax totaled only €20.65 billion or 1.9% of GDP.
This growing gap has several causes, including exemptions on overseas earnings, a generous regime of tax write-offs for losses incurred during the crisis years, and a controversial scheme that allows companies to bundle together subsidiaries so that profits in one enterprise can be offset against losses.
