STOP

92 • Fifty Shades of Tax Dodging
Spain
“This is not a problem of unfair tax competition, but that certain tax measures of certain EU countries constituting genuine State
aid have to cease definitely. But this is nothing new, in fact, we have been suffering this discrimination for decades.”
Cristóbal Montoro, Spanish Ministry of Treasury, regarding Luxleaks 1025
General overview
2015 has been a year shaped by the many elections in
Spain, with regional and local elections in May and general
elections due by the end of the year. The results of the May
elections opened up a brand new political situation in Spain,
bringing a large set-back for the conservative government
party (Popular Party) and the rise of new political parties
associated with new citizens’ movements for social justice. 1026
In this context, the political national debate has intensified,
and has included accusations of tax avoidance and the use
of tax havens by the political elite. A prominent example
were the accusations of money laundering and tax evasion
levelled against Rodrigo Rato, former Spanish Minister of
Finance and IMF Managing Director. 1027 However, he was
far from the only one. 1028 Surprisingly, and even though tax
data is considered confidential in Spanish law, the Minister
of Finance has used individual tax information in what some
have characterised as a political tool to try to discredit
political adversaries. 1029
A tax reform that entered into force included tax cuts
for businesses while failing to include any measures to
address tax dodging by multinational companies. 1030 The
Spanish government boasted that the new reduced rates
for corporations “puts Spain on a level of taxation below
its major trading partners such as Germany, France
and Italy”, 1031 and thereby placed Spain as an aggressive
participant in the European tax competition race.
Tax policies
On 1 January 2015, a new tax reform entered into force in
Spain, 1032 which among other things meant reductions in tax
rates for business. The corporate income tax rate was reduced
from 30 per cent to 28 per cent in 2015 and will be reduced
further to 25 per cent in 2016. Meanwhile the withholding
tax rate on dividends and interest paid to non-residents was
reduced to 20 per cent in 2015 and 19 per cent in 2016. 1033 The
reform did not include any measures to fight tax dodging and
it decreases the progressive nature of the Spanish taxation
regime, as Oxfam Intermon has highlighted. 1034
The LuxLeaks and SwissLeaks have raised the practice of tax
dodging high up the agenda in terms of public opinion. 1035 In
the case of LuxLeaks, the only Spanish company involved in the
tax rulings scandal was Mercapital, a private equity firm. 1036
In terms of potentially harmful tax practices, Spain has
recently approved a special tax regime for the Canary Islands
that will allow companies located there to pay a reduced
corporate tax rate of 4 per cent under certain conditions. 1037
These benefits are linked to investment requirements and
the creation of a minimum of five jobs. This regime includes
a controversial point, which is a deduction for economic
activities in countries of Northern and Central Africa. 1038 The
purpose is to promote the use of the Canary Islands as an
export platform to West African countries. 1039
On a more positive note, at the end of 2014, the Spanish
Parliament approved a law that establishes a board
responsibility for decisions in relation to investments or
transactions that potentially involve tax risks and obliges
company boards to define a tax strategy for their business. 1040
Tax rulings
Companies in Spain have the possibility of making a binding
enquiry to the tax administration about the tax treatment of
a transaction, like an advance price agreement. According to
the Ministry of Finance, taxpayers making the same enquiry
will get the same answer, 1041 implying that they do not grant
preferential treatment to companies through such rulings.
Spain had 52 Advance Pricing Agreements (APAs) in force by
the end of 2013, which places it among the countries in the
EU that issue most of these types of rulings. 1042 The Ministry
of Finance reports that the rulings in force are considered
confidential and that they can only be shared in certain
conditions strictly defined under the legislation. 1043