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We need a new taxation culture

| News | Tax

Yago Martos analyzes the continuous modifications of the tax regulations, as well as the changing criteria in their interpretation by the different administrative and judicial bodies.

The continuous modifications of the tax regulations, as well as the changing criteria in their interpretation by the different administrative and judicial bodies (General Directorate of Taxes, National Department of Traffic (DGT); Central and Regional Economic-Administrative Court, etc.), highlight the lack of legal security in Spain in the tax field. Although the principle of legal certainty should be the backbone of any legal system, the reality we face is very different.

The introduction of changes in tax legislation by means of continuous "patches", with less and less accurate wording and doctrinal criteria - both administrative and jurisdictional - in constant contradiction, makes it difficult to state that legal certainty is applied in this area.

Without being the object of going into excessively technical questions, we cannot fail to mention, by way of example, some of the recent themes that support this thesis:

  • Deductibility of interest on arrears settled in inspection reports.
  • Deductibility of the administrators' remuneration.
  • Settlement of the Tax on the Increase in Value of Urban Land (IIVTNU) when there is no increase.

It is particularly important to highlight the problems inherent in transactions eligible for the special corporate income tax regime, such as mergers, divisions, exchanges of securities and non-monetary contributions, in which, in compliance with certain requirements, it is possible to defer taxes on a global basis on IS, VAT, IIVTNU, IRPF and ITP/AJD.

When they are reviewed by inspection bodies, it is common for them to be questioned with often subjective interpretations, in relation to valid economic reasons, resulting in the regularization of disproportionate amounts, which may endanger the survival of the business, without prejudice to the fact that the courts may give the taxpayers reason many years later.

Uncertainty in tax matters
These situations bring nothing but uncertainty when it comes to assessing the tax costs of certain operations, sometimes even causing them not to be carried out due to the possible inherent tax risk, even though, from an economic and/or business perspective, this would be the most reasonable thing to do.

The lack of clarity in the regulations, the disparity in the criteria of the administrative and judicial bodies, the inconsistencies in the treatment of the same matter in the different areas of the Law, the lack of agile and rapid mechanisms to solve the problems that all this generates and the slowness of the courts, forces us to affirm that we live in a too unstable and uncertain environment in this matter.

In a context in which the Spain brand enjoys great value and in which the Spanish company is at full maturity, with highly qualified managers and a great knowledge of the different markets, perhaps more important than talking about tax benefits, would be to provide the system with the necessary legal security, through the implementation of appropriate measures, to attract and establish the necessary investment in the current economic context.

The demand for a predictable regulatory framework, which minimises conflict situations, is constantly being called for in numerous forums, where representatives of the business world are asking the government for fiscal stability to be able to compete in a globalised world and, at the same time, attract investment to Spain.

This concern also exists at the international level. Recently, the International Monetary Fund and the OECD published their report for the G20 Finance Ministers on Tax Certainty, which reflects the universal nature of the concern.

The report analyses the nature of fiscal insecurity, its main causes and effects on business decisions and suggests a set of measures to help politicians and administrations shape a more fiscally secure environment and to try to respond to all these concerns, which constitute a demanding and committed policy and administrative organisational challenge for any country.

Suggestions for improvement
The most relevant proposals are as follows:

  1. Improve the clarity and reduce the complexity of tax legislation, avoiding inappropriate retroactivities and providing comprehensive “vacatio legis” wherever possible.
  2. Increase predictable and consistent administrative performance by issuing standardized administrative criteria.
  3. Establish effective and rapid dispute resolution mechanisms, neutral and independent, at national and international level, in the form of amicable procedures or arbitration.
  4. Strengthen fiscal security in the international context through conflict prevention, through cooperative compliance programmes and prior agreements for simultaneous assessment or inspections, as well as the updating of double taxation treaties, through the Multilateral Treaty resulting from the BEPS plan, which would help to solve many of the existing problems, in the interest of international fiscal security.

In short, we can say that it is the opportune moment to undertake the challenge of establishing a new tax culture, which revalues the public as the axis of welfare policies, and recovers legal security and the principle of justice, conceiving the General Tax Law as a code at the service of the citizenry, promoting the stability of the rules and promoting the mechanisms for consultation and prior agreements with the Administration, as well as agreements within the verification and inspection procedures.

This is an exciting challenge that can only be tackled jointly by the government, the administration and taxpayers, and it is advisable to take a turn and start again on the path of a new tax culture.


For further information, please contact:

Yago Martos

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