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The Spanish Government validates the new capital gains tax

The Spanish Government recently validated two regulations dependent on the Ministry of Finance and Public Function. In the first place, the Royal Decree Law that reformed the capital gains tax, which had been repealed by the Constitutional Court, was validated. And secondly, progress was made on the reform of the public employment law to reduce the high temporality that exists among administration employees.

Within the framework of the first regulation, the Government approved the new municipal capital gains tax, the predecessor of which was annulled by the Constitutional Court. The rule had 198 votes in favor, 137 against and five abstentions. Although the new tax remained in operation for several weeks, it required the final validation of Congress for its formal formation.

Two forms of payment for taxpayers

As stipulated, the municipalities will have six months to transpose the norm into their regulations. However, the maximum percentages included in the reform of the law are already applicable. In turn, the Government modified the calculation method allowing two alternatives for taxpayers to choose according to their convenience. This was done in order to avoid the veto imposed by the Constitutional Court.

Since 2004, the regulation had had three sentences against the high court, until the final in October, which was without effect. However, the Government was able to obtain the support of its partners, despite the criticism that had been made against the modification. Simultaneously, the creation of a fund was also requested to compensate the municipalities for the loss of taxes.

The creation of a municipal compensatory fund

The Minister of Finance, María Jesús Montero, presented claims from her initial presentation in defense of the Royal Decree, stating that said fund was not going to be applied. “In the first place I want to remember that when the first sentence was known, in 2017 and then another two in 2019 until the most recent in 2021, the application of a fund was not required,” he added.

The right-wing group also voiced criticism of the tax, while demanding compensation for declining revenues. “We are against this Royal Decree for the form but also for the fund, because it taxes the capital gain that is already taxed in personal income tax,” said the popular deputy Carolina Spain.

Also in Pdecat and JxCat they opted for compensation for municipalities. “There is no solution, there is a lack of a compensation fund, one temporary and the other permanent,” said Deputy Josep Pallés y Masó. For his part, the deputy Joan Margall pointed out: “This Royal Decree was necessary, but it still seems like a patch. The structural problems will not be fixed in this way and some municipalities are going to see their income diminished ”.

A greater share of property taxes

The capital gains tax was approved by the Government of José María Aznar, weeks before leaving La Moncloa in 2004. At the same time, it has accused Montero of “raising taxes” with this capital gains reform, and has demanded a fund of compensation for the loss estimated to occur in the collection. “Be brave and create a compensation fund for municipalities,” he said.

Along a similar line, Carmen Martínez requested the abolition of this tax and its replacement by a greater share of the taxes levied on real estate, such as personal income tax. Martínez also pointed out that there is no additional fund for municipalities. However, unlike the PP, those of Inés Arrimadas have abstained from voting.