Although the target coincides with taxing the sector’s unexpected gains in this crisis, the community formula on benefits would generate less tax revenue than the 7,000 million the Treasury is making available
A philosophical coincidence, but many technical nuances. The future tax that aims to tax the extraordinary results (also called ‘falling out of the sky’) of the energy sector in this electricity and gas price crisis has opened a gap between the formula by which Spain wants to apply it and Wednesday’s proposal by the European Union. Commission. The Finance Minister, María Jesús Montero, has insisted that the “spirit” is the same, but the differences are notable regarding the concept of where they want to get that money in the companies’ income statements; the time when it will come into effect; and above all the impact that one or the other route would have on state collection.
Income vs Benefits
This is the main difference between the two routes opened in Madrid and Brussels. In the case of the extraordinary tax, the processing of which began this week in the Congress of Deputies, the intention is to tax the amount of sales (billing, revenue) received by energy companies between the years 2022 and 2023. older or younger. This will be done at a rate of 1.2%. In other words, if an electricity company bills 100 million euros per year, it pays 1.2 million euros. Treasury chose this formula because there was no escape: companies would have no room to adjust these results, which are crystal clear, with their accounting engineering. If this were done on net profit, it would be riskier for the executive’s plans, as companies can justify provisions to, for example, lower net profit and thus pay less.
However, the European Commission wants a tax on these profits at a rate of 33%. And what is an extraordinary advantage? For Brussels, the one who exceeds the average income of the last three years by 20%.
Affected sectors
It’s another one of the differences between one proposal and another. The Spanish tax will tax the income of energy companies with a turnover of more than 1,000 million euros per year. In this case, large companies such as Iberdrola, Endesa or Naturgy are included, in the case of the purely electric; but also Repsol and Cepsa, as oil companies; and gasmen. In addition, the government wanted to include banks in this tax as the exponential rise in interest rates taking place this year will increase their income like foam after a decade with the price of money at 0%. It will be the financial entities whose income from interest and net commission exceeds 800 million per year that will be affected.
However, Von der Leyen’s proposal excludes any other business sector that is not strictly energy. Europe wants to tax the extraordinary benefits of oil, gas, coal and refining companies.
Impact on collection
The Treasury had calculated that with the new amount (a capital benefit in the public interest and non-tax, i.e. a type of compensation that the companies will have to pay) it could raise about 7,000 million euros in the two years in which it is in effect. , temporary. In the case of energy companies, the forecast is around 2,000 million a year. In banking about 1,500 million per year.
If the Brussels proposal really succeeds (we have to wait for the details and unanimously approve it by all member states), the tax collection would be less than that 7,000 million euros. The government, and the energy sector itself, is aware that trading on profit involves a lower collection margin because it is a much more flexible figure in an income statement. Especially compared to previous years. Indeed, the Community proposal provides that “if the average annual result for the period of the three financial years beginning on or after 1 January 2019 is negative, the average taxable profit will be zero for the calculation of the temporary solidarity contribution”. In the case of companies like Repsol, with losses in both 2019 and 2020, the impact of the tax would be minimal if profits are taxed against income.
Impact on the consumer
It is a coincidence that, both in taxing benefits and income, the common citizen can suffer. The reality of the bill pending in the courts indicates that this practice is expressly prohibited. But nothing else. For now. Because the Treasury delegates the task of oversight to the National Commission for Markets and Competition (CNMC) and the Bank of Spain so that this does not happen. These organizations will be responsible for developing a formula that determines how this practice can be identified and then monitored so that it is not implemented. In any case, the law will impose a 150% penalty on the increase in costs passed on to customers, either through electricity rates or through higher interest or commissions.
Source: La Verdad
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
