Government cockups the budget law – corporate tax could drop 2%

A massive cockup in the text of the law a couple of years ago means that the corporate tax raise (from 19% to 21%) could be invalid for this year, which will cause the loss of millions of euros in lost tax revenue.

See, the law has expired and nobody noticed.

A bit of history. In 2011, Mariano Rajoy put up all the taxes using a decreto-ley (law decree). This is a temporary law that doesn’t have to go through Congress, but which is proposed by a Minister and voted on by the Council on Ministers.

He used this mechanism to put up personal taxes (IRPF) by about 6% and savings taxes by a similar 6%. This law was only supposed to be for 2012 and 2013. He also put up self-employed tax and capital gains from 19% to 21%, and in a third move, to ensure equality, likewise hiked corporate profit tax from 19% to 21%.

Of course, all this was supposed to end for this year, but Spain is still broke. So the 2014 tax law extended the first two laws, and enshrined them in a proper “law”, voted on in Congress.

They forgot to include the third law in the budget, but that didn’t matter, because that measure had been voted into law via the 2012 tax law.

BUT a serious legal problem has been identified by gleeful tax lawyers. You see, the 2012 Budget Law, although it said it would include the corporate profit tax level from 1st of January 2012 with no end date, the 2012 Budget Law is very clear in that the whole Bill, together with all its measures, ends on midnight on the 31st of December 2012.

Nobody noticed in 2013, because the Decree-Law was still valid, so it stayed at 21%.

But now in 2014 – the Budget Law has ended, and the Decree-Law has ended, so, technically, we’ve reverted corporate profit law back to 19%!

The practical result of this is that now in 2014, the self-employed must pay 21%, but companies only pay 19%. Unless the law is changed.

But, how to change the law?

The Ministry of the Economy is quickly preparing a decree-law to push through, but there are legal issues here that the companies are ready to jump on. The measure has to be adopted before a looming deadline to be included into this tax year, and the only way to push it through in time will be another decree-law.

But legal experts appear confident that the Courts will overturn this decree-law. The reason? A Decree-Law, under the Constitution, is only allowed in situations of urgent and extraordinary necessity. It seems clear that fixing a political cockup isn’t included in this definition. No doubt this will drag on through the courts….

Via CuartoPoder.es