The economies gradually emerge from the pandemic crisis and leave the States a legacy of debt that in Spain totals 125% of the national wealth, 28 points more than before the crisis. At the moment, this colossal volume of liabilities hardly weighs on the economy thanks to the action of the central banks: almost all of the Spanish bonds issued since February 2020 are on the balance sheet of the ECB, while the financial burden is lightened by consistent with low interest rates. In addition, this week, Frankfurt reiterated its ultra-expansive arsenal, especially the program for the purchase of debt securities for pandemic reasons, as long as the situation requires it.
However, the upward revision of growth forecasts for the euro area foreshadows an inflection in strategy, or at least in the ECB’s discourse starting this fall – not counting on a chronification of the inflation rebound today. discarded by Lagarde. Everything also indicates that the surveillance of public accounts will be restored: Brussels is issuing a warning to several countries, including Spain, about the need to embark on a path to correct imbalances as the economy recovers.
Corporate tax is one of the options considered by the G7 to adjust budget balances and at the same time limit the international tax competition that has been unleashed to attract capital. The initiative is healthy, because the tax practices of some countries have generated a race to the bottom in the taxation of large corporations, with a loss of global income for the public coffers of between 82,000 and 200,000 million euros per year, according to the OECD . Tax competition also generates inequalities between sectors and harms small companies, which are not in a position to arbitrate between jurisdictions, something harmful for the economy itself that requires innovation to get out of the crisis and take advantage of technological change. On the other hand, given the erosion of the corporate tax collection base, States are forced to resort to other sources of financing or to cut spending. A prospect that faces obvious resistance.
All of this motivates the Biden Administration’s proposal to set a minimum tax rate of 15% for corporation tax, an initiative that has aroused great interest among large advanced economies. But up to there the pact, because the concept of “minimum” does not have the same meaning on both sides of the Atlantic. The US is concerned about the relocation of business headquarters to tax havens, while in Europe the priority is for the digital giants – mostly North American – to pay taxes based on the country where they do business. This quid pro quo is reflected in the ongoing negotiations in the OECD, which incorporates both minimum concepts: Pillar I, which provides for an effort to harmonize tax rates, and Pillar II, which concerns taxation in the country where profits are realized.
In addition, one thing is the taxation established by the regulations and another is the effective collection: in Spain and other European countries, the income that enters the public coffers by way of corporate tax rises to less than half of what can be anticipate taking into account the type of taxation (for example, public income from corporate tax is around 10% of corporate profits, while the tax rate reaches 25%). This gap reflects the almost zero taxation of some digital companies and, above all, the reduction in collection capacity generated by all kinds of exemptions, some of dubious economic utility. A fiscal harmonization, but in all its aspects, to give meaning to the multilateral system and return the effort made by the States in the crisis.
Raymond Torres He is the director of business at Funcas. On Twitter: @RaymondTorres_