Amid cheers and applause, the Minister of Finance, Maria Jesus Montero, promised at the Andalusian PSOE congress held last Sunday “Fix capital gains” a day later. And it is true that on Monday the government approved its tax reform. But the reality is that “the capital gains issue” is still far from being fixed.
The Constitutional Court overturned the tax calculation on October 26, but the changes of the Government do not take effect until today. And without retroactive effect. That is, after the reform is drawn a legal gap of 15 days in which, in principle, taxpayers have been exempted from paying this tax, which leaves a hole of about 90 million in the coffers of Spanish city councils.
The Tax on the Increase in the Value of Urban Land – known colloquially as municipal capital gain – is the largest source of income for municipalities after the Real Estate Tax (IBI). For this year, the consistories had planned to collect 2,075 million euros for this tax, as Gestha recalled on Monday. This translates to a loss of nearly $ 173 million in revenue each month the tax is waived; more of 86 million every fifteen days.
As published by ABC, the legal vacuum produced after the Constitutional ruling encouraged many taxpayers to advance their sales operations to avoid paying the tax. However, legal sources warn that it cannot yet be taken for granted that these payments will be exempted. To begin with, because the Constitutional ruling has not yet been published in the BOE and its legal effects raise doubts. And also, because although the Government assures that there will be no retroactivity, the decree law approved on Monday can be modified in Parliament if it is processed as a bill.
The municipalities, however, find it difficult to tax the operations produced during these 15 days. In addition, they recognize that they will lose out with the reform. Yesterday, the mayor of Vigo and president of the Spanish Federation of Municipalities and Provinces (FEMP), Abel knight, assured the adaptation to the Constitutional Court ruling of the capital gains tax will mean that this will no longer be “confiscatory”, but also admitted that the collection “it will drop very significantly in relation to what citizens paid five or six years ago.
The government reform of the municipal capital gain establishes that two methods may be used to calculate the taxable base of the tax: apply some coefficients on the cadastral value based on the number of years since transmission or using the difference between purchase and sale value.
In most cases, this will reduce the tax. But in some certain cases, citizens will pay more, as ABC has published. In addition, it will be fixed a coefficient (maximum 0.14) to apply to those cases in which the transmission occurs in less than a year. Until now, no payment was made for transmissions made within one year of the acquisition.
The Government has decided to approve the reform via decree law, which for organizations such as the Treasury technicians (Gestha) may become unconstitutional. Far from being “fixed” the capital gains mess still promises war in the courts