"It should formally and definitively abolish the Wealth Tax, establishing the appropriate legal provisions so that it cannot be established as its own tax by the autonomous communities”. This was the forceful recommendation that the Committee of Experts for the Reform of the Spanish Tax System convened by the Government of Mariano Rajoy formulated not so long ago, in 2014.
Barely eight years later and with the tax operating on a wavelength very similar to that of then, another committee of experts, this time brought together by a socialist government, is outlining these days the last fringes of a report that for the first time in years it will ignore the agitated academic and political debate around the existence of the Wealth Tax and will focus on fine-tuning a proposal that
guarantee your payment throughout the territory and, if that were possible, dodge the legal battle around the matter that can be seen on the horizon due to the resistance of the Community of Madrid to accept this scenario.
Sources familiar with the work carried out by the Commission in recent months state that the internal discussions have revealed a majority support in the group to the idea of harmonizing both the tax base and the exempt minimums of the tax, in order to give coherence to the tax throughout Spain -with the exception of the Basque Country and Navarra, which would be exempt from this approach by virtue of their foral armor-, and also to establish a minimum floor of taxation throughout the territory, to prevent there from being places where the tribute is not collected, as is the case in the Community of Madrid. In the group of experts convened by the Minister of Finance, Maria Jesus Montero, dominates - in fact, from its configuration - the opinion that the exercise of fiscal autonomy carried out by Madrid has detrimental effects on the rest of the autonomous communities and that it is up to the State to act to avoid this type of distortion.
An ideological bet
Contrary to what happened in the not so distant 'committee of wise men' for the reform of autonomous financing (year 2017), in which its own configuration based on experts appointed by the different autonomous governments guaranteed its plurality, the debate intern in the commission created by the Ministry of Finance has not revolved around the maintenance or not of the Wealth Tax in the tax system but to the best formula to guarantee its effective application throughout the territory and to the amount that this mandatory tax floor should have.
In this sense, the 'playing field' responds precisely to the one already predefined by the Minister of Finance, M who has never hidden her intention to harmonize the application of wealth taxation throughout the territory and to put an end to what she understands as a Unfair tax competition by the Community of Madrid.
The government's argument focuses on the alleged 'fiscal dumping' generated by Madrid's tax reduction policy and the consequences this has on collection in other territories, a distortion that to date is based more on indications or judgments of value than evidence. Out of focus, however, more ideological motivations emerge, related to the damage to the story of tax justice that derives from the fact that there are large estates that save millions of euros each year on their tax bill for the simple fact of residing in Madrid. What the statistics of the Tax Agency say is that just for residing in Madrid something more than fifty large fortunes with a declared heritage of more than 100 million euros save two million euros per year on average for the 100% bonus that governs the tribute.
The 'Spanish exception'
Everything indicates, therefore, that the expert committee will give its endorsement to the Spanish exception in terms of Wealth Tax, a figure that little by little has been disappearing from the tax systems of developed countries. After the abolition of the tax in France in 2018, Spain appears as the only large economy in the euro that maintains the tax and one of the few in the entire OECD.
"It is an inefficient tax from an economic point of view, questionable from a legal point of view, which introduces distortions in economic activity and acts as an incentive for taxpayers and capital to flee," emphasizes the director general of the Institute of Economic Studies , Gregory Left.
Izquierdo illustrates the distorting nature of the tax by referring to an academic report prepared in its day in Germany that concluded that for every euro of extra collection obtained through this tax figure, five were deducted from the productive economy. "His net effect on collection is negative because its application affects employment, economic activity and, by doing so, the collection of other taxes. The territories that apply the Wealth Tax, on the other hand, lose much more than what they obtain from that figure.
In the case of Spain, it also happens that there are already different figures that tax the patrimony of the taxpayers such as the IBI or certain fields of personal income tax, for which taxpayers pay close to 15,000 million euros per year, "so the more you enter for Patrimony, the greater the situation of double taxation that occurs," Izquierdo insists.
Defenders of the tax stress its importance not only as a wealth redistribution instrument but also as a guarantee of fairness of the tax system, a symbol that it is geared towards taxing more those who enjoy greater wealth. In 2019, the last year for which there are official data, more than 200,000 taxpayers paid the tax, who paid an average fee of 11,000 euros per person. Two out of three potential taxpayers with more than 30 million euros of declared assets, however, did not pay a single euro. All of them have their residence in Madrid.