The Catalan Government creates a tax on bank deposits with expectation of earning €500 million per year
With this decision, the Catalan Government wants “to safeguard” its power to adopt this type of tax or the equivalent revenue, after the Spanish Government announced the creation of its own tax while keeping it at 0% to prevent the Autonomous Communities from approving it. The Constitutional Court has already backed the taxes on bank deposits created by Extremadura, Andalucía and Canarias. Catalonia’s tax will not affect clients but only the banks. It will affect all banks operating in Catalonia, independent of where they are based. In addition, it will have retroactive effects as from the 30th of November. The Spanish Finance Minister warned that the Spanish Government will fully oppose it.
Barcelona (ACN).- The Catalan Government will create a tax on bank deposits affecting all banks operating in Catalonia, no matter where they are based, as Francesc Homs, the Executive’s Spokesperson, announced on Tuesday morning after the weekly Cabinet meeting. According to Homs, Catalonia’s tax will not directly affect the clients but only the banks and is expected to bring in €500 million per year. Adopting this tax was one of the points still under discussion in the talks trying to reach a parliamentary stability agreement between the Centre-Right Catalan Nationalist Coalition (CiU) and the Left-Wing Catalan Independence Party (ERC). In fact, the definitive agreement was announced this evening. The Catalan Government adopted the new tax today in order “to safeguard” its power to adopt this type of tax or the equivalent revenue, after the Spanish Government announced the creation of its own tax two weeks ago, while keeping it at 0% to prevent the Autonomous Communities from approving this type of measure, as Homs explained. The Catalan Government is trying to have the Catalan Parliament pass the tax before the Spanish Parliament passes the Spanish Government’s tax. The Constitutional Court has already backed the taxes on bank deposits created by Extremadura, Andalucía and Canarias prior to the Spanish Government’s tax. If the tax was adopted at Spanish level, the Spanish Government should compensate the Autonomous Communities having created it before with the equivalent revenue. For this reason, Catalonia’s tax will have a retroactive effect as from the 30th of November, since the Spanish Government tax is meant to start as from the 1st of December.
The Spanish Government announces total opposition
On Tuesday evening, the Spanish Finance Minister, Cristóbal Montoro, warned that the Spanish Government will “fully oppose” the tax and considered it “to be inappropriate”. Furthermore, Montoro ruled out the possibility of compensating Catalonia as the tax “has not been in place”. Homs explained that the adoption of this tax was a necessary measure in order to increase revenue, since the Spanish Government is blocking other initiatives such as the drug prescription fee. In addition, Homs reminded that in 2013, the Spanish Government imposed a 0.7% deficit target on the Catalan Executive, which is “impossible” to reach in the current context of economic recession. A few months ago, the deficit target for the Catalan Government in 2013 was 1.1% but the Spanish Government decided to lower it further and keep the difference to use for its own deficit target that year, which is 3.8%.
The tax details
The Catalan Government has established 3 different tax rates: 0.3%, 0.4% and 0.5%. They will tax total deposits by all banks operating in Catalonia, no matter where they are based. The tax rate varies in relation to the volume of deposits each bank has in Catalonia. For those banks with deposits below €150 million, they will have a 0.3% tax. For the financial entities with deposits between €150 million and €600 million, the tax rate is 0.4%. Finally, for the banks with more than €600 million in deposits in Catalonia, the tax rate is 0.5%.
Besides the tax rate, a fixed fee will also be included for the two larger types of banks. Those entities having deposits in Catalonia worth between €150 million and €600 million will have to pay an additional fee of €450,000 per year. The banks with more than 600 million in deposits will have to pay a €2.25 million fee per year.
In addition, the Catalan Executive’s proposal establishes a €200,000 deduction for banks based in Catalonia. It also sets a €5,000 deduction for each branch that a bank has in Catalonia, no matter where they have their headquarters. Furthermore, for the branches set in towns with less than 2,000 inhabitants, a deduction will be set at €5,500. This decision aims to benefit the banks with a wide and diversified network in Catalonia.
The proposal also includes further deductions, targeting all the banks, in order to create incentives for offering loans for economic and social projects developed in Catalonia. In addition, the deduction will also affect loans for projects linking the public and the private sectors in Catalonia.
The law also includes fines for the banks that de-localise deposits outside the Catalan territory, sending money from branches based in Catalonia away in order to avoid paying the tax. The fine would represent an additional 50% on top of the defrauded amount.