The minimum rate of 15% in corporate tax that will be incorporated into the 2022 Budget project will affect only large companies: 1% of the business fabric, which nevertheless accounts for 60% of the collection. But it will have a limited effect on public coffers. The minimum rate will be applied on the tax base, as confirmed on Tuesday by the Minister of Finance, María Jesús Montero, and the bulk of these companies already pay taxes above that percentage.
The average effective rate paid by these companies on the tax base is 21.5%, according to the latest statistics from Consolidated annual corporate tax accounts of the Tax Agency, relative to 2018. If the calculation is made on the benefit, the average rate is notably lower: 9.5%.
The design that the Government plans to apply is in line with the one contemplated in the 2019 Budget project that failed to be approved in Congress, according to different government sources. This scheme provided for a tax floor of 15% for all companies integrated into groups or that invoiced more than 20 million per year: 12,247 companies, which represent 0.7% of the total of the more than 1.5 million companies that declare The tax.
Specifically, 5,521 are consolidated groups, which account for half of the turnover of the entire business universe and almost 60% of the profits, but only 32% of the tax paid by all companies. Spanish multinationals paid taxes in 2018 at an average effective rate on profit of 5.26%; 4.22% are the largest, with revenues of more than 1,000 million. The average effective rate on the tax base, however, is much higher: 19.3% for all groups. More than four points above the ground that the Government defends.
The difference between the two rates is due to the fact that the tax base is determined after applying various adjustments to the positive accounting result, that is, the profit. This is because the profits that companies obtain from their subsidiaries abroad are almost exempt from taxation in Spain, although in those jurisdictions the nominal rate of the tax is lower than that in force here – 25%, which rises to 30% for banks and hydrocarbon companies—. In 2019, the double tax exemption totaled 153,080 million (almost 123,000 of them from groups). Companies can also offset the negative bases of previous periods, a figure that in 2019 was 26,620 million.
In this year’s Budgets the exemption for dividends and capital gains abroad was limited from 100% to 95%. The collection forecast contained in the accounts is 473 million for this year and 1,047 million in 2022.
The companies that are not integrated into groups and invoice more than 20 million were 6,726 in 2018. Those that invoice between 20 and 100 million were taxed in 2018 at an average effective rate of 22.5% on the tax base; 20.6% those with income between 100 and 500 million; 24% are firms with a turnover between 500 and 1,000 million and 22.3% those that invoice above that threshold. If profit is taken as a reference, the percentages are lower, but higher than those of the companies integrated into groups: companies that invoiced between 60 and 1,000 million paid an effective average rate of less than 15%; those with a turnover of between 20 and 60 million and more than 1,000 million were taxed more than 15%.
The failed 2019 Budgets project, whose proposal on corporate tax the Government wants to recover, did not break down what income would provide a minimum rate of 15%; It only included an estimate of what this measure would collect together and the limitation of the exemption from 100% to 95% for double taxation: 1,776 million. Despite this, the secretary general of Podemos, Ione Belarra, advanced this Tuesday in an interview that the floor of 15% will contribute between “3,000 and 8,000 million euros, which would bring Spain closer to the European average in terms of tax collection” . Tax experts assure that a minimum rate of 15% as contemplated in the failed accounts of 2019 would not collect these amounts anywhere, unless complementary measures are introduced. For example, limit deductions for losses or apply a further reduction in the exemption for dividends and capital gains, up to 90%, as applied in Germany.
At first, the socialist wing of the Government resisted incorporating the minimum rate of 15% in the Budgets, despite the fact that it is contemplated in the coalition agreement, claiming that it was necessary to wait for the conclusions of the committee of experts, at the beginning of 2022, for the tax reform. Finally, the PSOE gave its arm to twist at the insistence of Podemos, who called the tax change “essential.” The final design of the measure will clarify its scope.
International negotiations
In July, an international consensus was reached on a minimum corporate rate of at least 15% for large multinationals. The details of the new scheme – in which the OECD and the G-20 are working -, such as the determination of the basis on which to calculate the tax, is yet to be defined.
The Minister of Finance, María Jesús Montero, assured on Tuesday that the minimum rate to be approved in the 2022 Budgets will be adapted in the future to the conclusions of the group of experts for tax reform and international agreements: “We have used the wording simplified that is going to have on this figure so that, if in the future the European directive, other international agreements or the recommendations of experts raise another issue, we will incorporate it throughout the tax reform “.