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The failure of Spanish Fiscal Amnesty

Initially it seemed a good measure; the Tax evaders would lay everything out, confess their sins, do penance, and make a decision to make an act of constriction, paying back what had previously been saved. Perhaps some see this as a deplorable act and perhaps rightly so, although other countries such as Germany, Italy, etc.., Or as some like to call them “neighboring countries”, had already undertaken similar measures within Europe, making everything a little more understandable.

That being said, our purpose is not to discuss the ethics of the measure – though it seems understandable why the typical person is feeling outraged for one reason or another. And the fact is, that if in the past you have always paid all your taxes it feels quite sick that those who haven’t done it up until now will actually receive a reduction! Given what is happening these days though, and the situation being what it is, we can say that the end justifies the means. After all, if we want to keep the Hospital running or have air conditioning in schools, we need to be making more money on taxes. At the end of the day, what else could the economy have done?

The problem is when it is done wrongfully. And here it is where Lawyers and Tax Advisors feel indignant, because it is almost impossible not to advice a client: you shouldn’t do this, it’s not stable! According to the Spanish Finance Minister the intention was to collect around 2,500 million€. In a country with around 20€GDP (240,000 million€), you see that this isn’t a very ambitious attempt from the Government. However, here and now, and according to the recent proposal of the AEAF (Association of Spanish Tax Advisors), we can shame this measure, and explain the number of risks involved with this questionable procedure, making it firmly understood why we would never recommend its application to our clients:

  • The probable unconstitutionality of this measure – and rightly so, because according to the Constitutional Court there are rules against substantial changes that modify contributors positions related to the taxation system.
  • The Royal Decree 12/2012 which passed the rule for Fiscal Amnesty does not consider that cash owned before the 31st December 2010 has any rights to Fiscal Amnesty if deposited in a bank account. Because it is a substantial matter it could easily be overruled by the National Court, who are studying this matter at the moment.
  • There are severe difficulties to apply this measure in País Vasco and Navarra because of their special tax regime.
  • After an inspection procedure has began you are not able to apply forl the Special Fiscal Amnesty, meaning you instead would face the penalizations.
  • The uncertainty of the effects of this measure.  Due to the lack of knowledge regarding the purpose your information will be put to by the Tax Administration, it could involve further future risk. It might help them to investigate other tax figures that the Fiscal Amnesty rule does not accept, such us: VAT, Inheritance Tax, Gift Tax or the recently revived Wealth tax.
  • Or the incoherence of this measure, without foreseeing its consequences in the Laws on preventing money laundry.

If the Government has not lost faith, and has not changed its mind on the feasibility of this measure, then maybe it is time that we start doing things properly. As the saying goes: settle one’s differences and reconcile as two friends deciding to kiss and make up When this “hidden” money is returned to the battered Spanish economy, surely our Government would have more flexibility. More jobs, better healthcare, and lower taxes wouldn’t be a far leap to make from this stage, and are certainly all aspects that we feel at present.   For those who are wishing to wipe the slate blank and start afresh, voluntary regularization can be a beneficial step in the right direction. Though as we’ve previously emphasized, paying ones taxes in the first place is clearly the most efficient and risk free method to choose. There is always the regular late taxation form, which can work out cheaper than Fiscal Amnesty, and is correctly legislated, checked, and backed by guarantees.

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