The Spanish government recently sent an update of the Spanish Stability Program for 2018-2021 to the European authorities in Brussels. This new update would raise certain Spanish Social Security pensions by 1.6 percent this year and by 1.5 percent next year, at an estimated cost of 1,500 million euros in 2018 and 1,800 million euros in 2019.
Note that, although the Spanish economy is slowly recovering, it is still under surveillance. It seems that the raise was a condition set by some non-governing parties to grant their approval and consequently reach the majority needed in the Spanish Parliament to approve this year’s general state budgets.
To cover this increase of public spending—and avoid a major imbalance of public finances—the Spanish government has proposed the adoption of new taxes, including a tax on digital services. This new tax, according to the Spanish government, would allow an increase in revenues of 600 million euros in 2018 and 1,500 million euros in 2019.
This tax on digital services, also known as the “Google tax,” aims to tax large digital companies, such as Google and Amazon, for their benefits effectively generated in Spain. In other words, the purpose is to tax up to 5 percent of the invoicing of digital services such as intermediation, advertising, or the sale of data to companies—services that are the most difficult to capture by the current tax systems. It is worth mentioning that there is, at least in Spain, a major consensus in favor of this proposal among the key parties, as they believe that this Google tax is a firm step towards taxing all kinds of businesses evenly, so that the tax pressure is not only born by the so-called “old economy.”
As mentioned by the Spanish government, the new tax will only apply to companies with a high amount of annual revenue, although the concrete thresholds have not yet been defined. Román Escolano, the Spanish economy minister, explained in the Economic and Financial Affairs Council held in Sofia (Bulgaria) this month that the tax will be aligned with what other major European countries such as Germany, France, Italy, and the United Kingdom have already approved. This also means that they are not willing to wait for the results of the ECOFIN and the OECD debates currently being held on this potential new tax.
In terms of timing, Escolano said that the experts of the Spanish Tax Agency are already working on the design of the new tax. The Spanish government intends that all the parliamentary groups approve the measure without discrepancies and thus hasten the process so that it can enter into force by 2019—or even this year.
Everything suggests that this new tax is going to come through one way or another. So far the details of this new tax (tax rates, taxpayers, thresholds, etc.) are still unknown, but I believe that we will start to know more about it in the following months.