Spain
Spain moves forward with Google tax for 2021 budget
President Pedro Sánchez aims to get the financial transaction tax approved within the week.

Spain's economic recovery planned by the coalition government led by Pedro Sánchez depends on approving as soon as possible a considerable tax increase that fits in with the budget bill, which will be presented through the reconstruction commission in Congress. Last Thursday the Lower House approved the first parliamentary procedure of the 'Google Tax' and on Wednesday it will be the turn of the so-called 'Tobin Tax', or tax on financial transactions, to tax the purchase of shares as well as debt and financial derivatives of Spanish companies. With these new taxes, the government intends to increase the income forecast in its budget project for 2021, which must be passed by Congress before the end of September.

The Financial Transactions Tax Bill is on the agenda for Wednesday's plenary session in Congress and the Government hopes to move it forward with the support of ERC, PNV and JxCat, according to the consulted sources.

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The controversy is the amount that the Executive expects to receive from this tax. The Unidas Podemos party guarantees an 850,000 million euro collection for the public coffers. A sum that economists and industrialists refute by assuring that the crisis opened by the coronavirus has reduced the number of listed companies that exceed the threshold of 1,000 million euros of capitalization in the Spanish stock market, an indispensable condition for this tax to be applied.

"The government should review the forecasts for the collection of this tax after the pandemic," a renowned economist told LPO, since the regulatory text began to be processed in Congress in mid-February. "If we add to this that the crisis has brought volatility and uncertainty in the markets, triggering short-term operations. This means that investors will wait for a while to introduce changes to their portfolios and this may hurt the government's collection efforts," he said.

Other factors that could hinder the success of this tax would be the significant increase in unemployment in Spain, which is at an all-time high due to the virus, and could cause many families to withdraw their savings from the stock market. In other words, almost 15% of shares listed on the Spanish stock exchange would be lost, according to several economists. In addition to these difficulties, the amendments introduced by the opposition that reduce the coalition government's pretensions with the 'Tobin Tax'. Specifically, the People's Party is asking to exempt strategies labelled as sustainable investment, so that 'green investment' can draw more investors in the wake of the epidemic.

The 'Google Tax' is still pending.

Sanchez's allies (ERC, PNV and JxCat) pushed through the 'Google Tax' on Thursday to continue its subsequent debate and processing of amendments in Congress. The tax on certain digital services is getting closer to being implemented. Specifically, it proposes to tax companies with a turnover of more than 750 million euros worldwide and whose income in Spain from digital services affected by the tax exceeds three million euros.

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According to the government's announcement, the tax rate will be 3% and will apply to the provision of advertising or intermediary services and the sale of data based on information provided by the user. The PP, Cs and Vox parties opposed the measure, warning against its "unilateralism" and the "danger" of its application in times of crisis. The truth is that Spain could have a major enemy if Sánchez decides to push forward with its approval. The president of the United States, Donald Trump, has been warning Moncloa about this for some time and does not rule out passing tariffs on exports to his territory.

At the most recent Forum in Davos, which Sánchez attended, the American government threatened the United Kingdom with imposing tariffs on the purchase of British cars if it approved a similar tax. At the same summit, France put its project on ice in the face of pressure from Trump. The Finance Ministry has already assured that the process will continue in the Lower House. The government hopes to collect 968 million euros from this tax next year.

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