The Constitutional Court has advanced this Tuesday a ruling in which it considers certain articles of the Law Regulating Local Finance to be contrary to the fundamental law, a consolidated text that was approved by royal legislative decree in 2004 by the Government of José María Aznar. The Constitutional Court has annulled certain articles that assume that urban land is always revalued, so that taxpayers must always liquidate the so-called capital gains tax, despite the fact that the sale price of the affected land is lower than the purchase price. A blow to the income of the municipalities that the PP has already asked the coalition government to compensate on account of the Budgets, to accuse it of not fixing in three years a mess that has been pending for 17 years.
The Constitutional Court gives a new blow to the capital gains tax and cancels articles that assume that urban land is always revalued
The deputy secretary of Territorial Policy of the PP, Antonio González Terol, first claimed from his Twitter account for help to the Executive. “We demand from the Government of Spain a compensation fund for the loss of income of the municipalities in 2022, how do you expect them to pay for the maintenance of public services?”, Assures the deputy. But the message continues, already in attack mode: “They have been unable to approve a rule that gives legal certainty on this matter in 3 years.”
But the reality is that not only the Government of Pedro Sánchez has been “incapable.” In fact, the first sentence against this norm dates from 2017, when Mariano Rajoy was already in his sixth year at the Palacio de la Moncloa. That year the Constitutional Court declared unconstitutional to subject to taxation situations of non-existence of increases in value. In 2019 he overthrew another part of the law for “those cases in which the installment to pay is higher than the equity increase“.
In 2017 the roles were reversed. The then Minister of Finance, Cristóbal Montoro, rejected any type of “compensation” from the Government to the municipalities, as demanded by the opposition, since, he assured, the sentence did not invalidate “the application of the tax”, but was a “precision and a technical correction of the tax”. In fact, the minister assured that it was “logical, coherent and normal” that the Constitutional Court failed what it failed.
“We are not faced with the impediment of collecting, exonerating a tax, but with the impediment that if there are no capital gains, as is logical and normal, the municipalities or any other taxpayer could collect this tax,” Montoro said in the Senate then, in a situation very similar to the current one.
Montoro must have known what he was talking about because it was he who, as José María Aznar’s Minister of Finance, signed the royal legislative decree that recast the Regulatory Law of Local Finance. Almost three decades later, he was back in the same chair, with Mariano Rajoy at the Moncloa.
The current Ministry of Finance has assured in a press release that it will review the Tax on the Increase in the Value of Urban Land to guarantee its constitutionality and the financing of the municipalities, although for this they have to first wait for the full publication of sentence.
In that 2017 of the first sentence of the Constitutional Court, the capital gains tax in general represented an income of 2,557 million euros, according to data from the General State Comptroller. Since then it has decreased to around 2 billion. Neither during the governments of José Luis Rodríguez Zapatero nor those of Mariano Rajoy, with Montoro himself as minister, was the text remedied.
In 2019, the Senate was processing a reform of this tax, but the electoral call decided by Pedro Sánchez caused the bill to decline. Since 2020, when a government was re-constituted, no one has promoted new changes in this regard.