Treasury enters 120 million in its first major raid on taxpayers with tax residence outside of Spain

The tentacles of the Treasury reach further and further and already have under control the activity of 1,907,649 taxpayers with tax residence outside of Spain, as revealed by the Tax Agency in a report sent to Brussels to which ABC has had access. The report has been prepared by the Planning and Institutional Relations Directorate of the Tax Agency, within the framework of the objectives to be met by Spain in order to receive funds from the European Recovery, Transformation and Resilience Mechanism, and its objective is to accredit the capacity of the Spanish Tax Administration to take advantage of the information received through the different information exchange agreements launched in recent years, in the heat of the growing concern of the authorities around the world about the strategies to avoid paying taxes. taxes . MORE INFORMATION Treasury puts the 'Tobin tax' and the 'Google tax' under review in search of new tax revenue The European Commission imposed this objective on Spain (and other countries) in its crusade to reduce the hole of more than 825,000 million euros in fiscal income that, according to their calculations, the tax administrations of the European Union lose each year due to their inability to control operations with local fiscal importance that take place outside their territory. Brussels specifically asked the Government to adopt the necessary measures to identify at least 85% of the taxpayers from whom it has received some type of fiscal data from the administrations of other countries. The report reveals that 90% have already been identified. The refined information on these nearly two million taxpayers has served the Treasury to face a first major raid on compliance with tax obligations by non-residents in Spain, the result of which, according to the information sent by the Government to Brussels , has been the opening of 774 tax investigations and the obtaining of 123 million euros in undeclared tax revenue. Other sources of information The door to reveal these new tax revenues, historically hidden from the Treasury due to mistrust between tax administrations when it comes to sharing their tax data for fear of losing revenue, has been opened quite recently, to the beat of the new era of information exchange opened in its day by the Obama Administration with the Fatca system. Fatca forced financial entities around the world to identify before the US administration citizens or residents in the United States with money, accounts or funds in each entity and to provide information on their positions in them. The United States initiative accelerated the implementation of information exchange models both in the OECD (CRS) and in the European Union (DAC) and has resulted in an exponential increase in the flow of tax data reaching the tax administrations of around the world on assets abroad of local taxpayers or assets in the country of foreign taxpayers. Sources in the fight against tax fraud say that until a few years ago this information could only be obtained by lucky breaks or interested leaks of information with tax significance, as happened with the Luxembourg accounts or the Panama papers. Things began to change in Spain with the famous model 720, which forced Spanish taxpayers to reveal their assets abroad under penalty of imposing stratospheric fines for hiding information – now declared illegal by the European Justice – and also with the information exchange agreements. In 2017, Spain had tax information exchange agreements within the framework of the OECD with 49 jurisdictions, in 2021 that figure already rose to 108 jurisdictions. Another instrument to detect fraud The new flows of information obtained through these channels, which the Tax Agency began to exploit in an incipient way in 2018, have encouraged the Spanish Treasury to systematize the exploitation of this information with the aim of preparing profiles of risk and carry out specific actions against potential non-compliance by non-residents, either due to ignorance of their tax obligations or due to intentional tax avoidance strategies. The Recovery Plan did nothing but speed up that process. Objective number 383 of component 27 of the Spanish Recovery, Transformation and Resilience Plan included the Government's commitment to identify at least 85% of the more than two million taxpayer records that the Tax Agency admits having received in recent years thanks to the different information exchange agreements signed in this period. “In recent years, the rapid development of information and communication technologies has made it easier for the taxpayers of a State to hold investments in jurisdictions other than the one in which they have their tax residence. Practice has shown that this phenomenon can serve as a tool for tax evasion, with many states sharing a strong interest in establishing common mechanisms that allow them to maintain the integrity of their tax systems", explains the Tax Agency in the report sent to Brussels. Basically, what the Agency has done is purge the more than two million records received, cross-reference that information with that available in its own databases and thus identify taxpayers that it did not control or complete the information on those that they did appear in their records but for which they did not have complete information. This undermining task has allowed the tax administration, on the one hand, "to prepare on behalf of the taxpayer a complete declaration of all his income" and, on the other, "to regularize those data that may have been omitted." And not only that, the Treasury has also taken advantage of this information to fine-tune risk profiles based on the inconsistencies detected in the Income and Wealth declarations of registered non-resident taxpayers.

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