A few months ago, US President Barack Obama announced to Congress: ”This is not class warfare, it’s math.” If the crisis leads to a fall in revenue for public authorities, spending must either be cut or taxes increased.
If we assume that governments cannot cut back on social services because the social rights they have achieved should not be touched due to the crisis, then new tax increases become necessary. Instead of raising existing taxes, the former Spanish government had preferred to try to maintain the level of revenue it needs by reintroducing a recently-abolished tax: the IMPUESTO DE PATRIMONIO, or Wealth Tax. This tax was never actually abolished, although the full rate was indeed scrapped in 2009 with a 100% rebate. The government has therefore simply done away with this rebate in order to reintroduce Wealth Tax.
The tax applies from 18 September 2011, although the concession is scheduled to increase once more in 2013. This means that Wealth Tax declarations need only be submitted for the years 2011 and 2012 (due on 31 December each year). It is important to remember that non-residents are also obliged to pay this tax. Declarations must be submitted to the tax office each year together with the income tax declaration.
The most important changes to the rules on Wealth Tax introduced in the Real Decreto-ley 13/2011 are the following:
1. Tax allowance on residences: the maximum rate for tax exemptions on the value of the own residence (for residents) has been raised to €300,000 (previously €150,253.03).
2. General tax allowance: unless the autonomous communities rule otherwise, the general tax threshold is €700,000.-
Whether these new rules and the reintroduction of the tax will have any real impact or affect public authorities’ revenues is debatable. It appears that the Socialist Party intended to make political capital through the reintroduction of a ‘tax on the rich’ (elections took place in a short time after de tax reform and they were a spectacular failure for the Socialist Party anyway ), but the real impact of the tax’s reintroduction will not be able to solve the difficult situation surrounding the public finances.
Carlos Prieto Cid, Lawyer