Council of Ministers

Government modifies Corporate Income Tax for large companies to meet path of public deficit

Moncloa Palace, Madrid, Friday 30 September 2016

The Council of Ministers approved, through a decree law, a series of tax measures to help meet the new fiscal path agreed with the European Union, which allows for a longer term to meet the public deficit targets.

The acting Vice-President of the Government underlined that the goal is to increase revenue from Corporate Income Tax, although this is not considered to be a tax hike, but rather a change of methodology in the instalment payments that companies must make.

For his part, the acting Minister for the Treasury and the Public Administration Services, Cristóbal Montoro, highlighted that the new system only affects those companies with turnover in excess of 10 million euros, a total of some 9,000 companies.

The royal decree sets a minimum rate of 23% of accounting profit to be settled in the instalment payment; this percentage will rise to 25% for credit institutions and those that are engaged in oil extraction operations

This new legislation will come into force following its publication on Friday, 30 September, in the Official State Gazette. Hence, for the two remaining instalment payments to be made this year, in October and in December, those companies affected will have to settle the corresponding new amounts, specified Cristóbal Montoro. The new system of payments will not only apply in 2016, but until such time as Spain reduces its public deficit below 3% of the Gross Domestic Product.

The minister explained that the goal is for Corporate Income Tax to continue providing the same level of revenue as in recent years, of around 20 billion euros. He also remarked that this is not a tax hike, since it is equivalent to a payment on account as settled by individuals for Personal Income Tax which is then discounted when their tax return is made the following year.

Budget stability and financial sustainability

Cristóbal MontoroPool Moncloa/J.M. CuadradoThe Vice-President of the Government reported that the government is analysing legislative and administrative measures to alleviate the institutional impasse which makes it impossible to present the General State Budget. These initiatives, she said, will help avoid both the certain negative effects of the breach of the public deficit target with Brussels and harming the people of Spain. It will also allow public authorities to maintain the level of public services they have been providing to date.

In this regard, Soraya Sáenz de Santamaría confirmed that her parliamentary group is negotiating a proposal to amend the Constitutional Law on Budget Stability and Financial Sustainability with the rest of the parliamentary groups, with the aim of adhering to the fiscal path approved by the European Union.

For his part, the acting Minister for the Treasury and the Public Administration Services, Cristóbal Montoro, specified that the amendment to the law, which will require an absolute majority from the Lower House, will allow the caretaker government to present Parliament with "the new deficit targets for all of the public authorities and the regional governments".

In this regard, he declared that they have received a "positive response" and a "good feeling" in the talks held to date with all of the parliamentary groups and with the regional governments to amend this law.

Improvement in payment system to regional government suppliers

Soraya Sáenz de Santamaría, Cristóbal MontoroPool Moncloa/J.M. CuadradoThe Government Spokesperson recalled that on Thursday, 29 September, the Delegate Commission for Economic Affairs approved the distribution of the Regional Liquidity Fund (Spanish acronym: FLA) for the fourth quarter of the year to pay the debt maturities of the regional governments and their public deficit. The main goal, she pointed out, is to improve the period in which regional government suppliers are paid.

Cristóbal Montoro pointed out that the 10.49 billion euros distributed on Thursday among these regional governments correspond to the financing of 0.3% of the public deficit. The change in the Stability Act will enable this target to rise to 0.7%, and hence, to finance the difference. "We are talking about more than 4 billion euros that we would need to use and that we now have available, because the 10 billion euros freed up yesterday are clearly below the threshold of the total under the FLA forecast for this financial year".

According to the Minister for the Treasury and the Public Administration Services, this is an "urgent" change to avoid prejudicing suppliers of public healthcare and education, and social services.

Extension of digital justice

The Council of Ministers approved an exception to the order of 14 July that regulated the close of the budget execution with the aim of allowing several essential supply contracts for the digital justice project to be pushed through.

Soraya Sáenz de Santamaría announced that 1.7 million euros will be invested "in purchasing 1,450 ultra light laptops and accessories so that judges, prosecutors and court clerks that work for the administration of justice can work in this digital environment" regardless of their physical location. Moreover, she specified that these will be latest generation resources that are essential for working on digital files, for issuing opinions, rulings and gaining access to case law and to other information.

Soraya Sáenz de SantamaríaPool Moncloa/ J.M. CuadradoThe Vice-President of the Government highlighted that as from 1 January, almost 50 million communications have been made electronically and that there are now 600 courts that "do not use paper but only electronic files". This has allowed the number of days to present and notify documents in ordinary proceedings to be reduced from 60 to 19 days and a saving of more than 390 million euros to be made".

Digital justice has also led to a 472% increase in the number of writs sent on public holidays to courts and tribunals, and a 547% increase in those sent in the evenings and at night-time, pointed out Soraya Sáenz de Santamaría. Legal professionals are now allowed to send procedural documents 24 hours a day, every day of the week. This helps speed up justice and make it more flexible".

Furthermore, the Vice-President of the Government recalled that, according to data from the OECD, "Spain, from among the European countries and the most developed countries as a whole, is at the forefront in terms of the digitalisation of its administration of justice".

Drafting of legislation through ministerial web portals

The government agreed to hand down instructions to allow public participation in the process of drafting legislation through the web portals of ministerial departments.

Soraya Sáenz de Santamaría explained that the aim of the measure is for citizens not to have to change their method of participation according to whether it is a ministerial order or of one ministerial department or another, and that the process will be homogenous on the different web portals. Furthermore, a link will be established to these web portals at the electronic General Access Point of the General State Administration, such that citizens can address any ministerial department to request a regulatory amendment or send their opinion on a certain issue.

Current affairs

Soraya Sáenz de Santamaría, Cristóbal MontoroPool Moncloa/J.M. CuadradoAs regards whether Mariano Rajoy will stand for a new vote of confidence in the coming weeks, the Government Spokesperson recalled that "we have always advocated and will continue to advocate the option of a PP government, headed up by Mariano Rajoy, which won the elections, that best respects the election results and that will offer the country the greatest stability", but it depends on an agreement being reached with the other parties.

As regards the situation of the PSOE [Spanish Socialist Workers' Party] and the possibility of the King calling a new round of consultations with all the parties with a view to a potential investiture session, Soraya Sáenz de Santamaría opted not to assess the internal situation of other political parties and commented that any call for a new round of consultations is a "royal prerogative in conjunction with Parliament and its speakers".

As regards whether the situation of the National Securities Market Commission (Spanish acronym: CNMV) will be resolved by 6 October when the mandate of its President and Vice-President expire, the Vice-President of the Government explained that, in contrast to what happens with other bodies, the CNMV has no system for extensions when the mandate of its members expires. For this reason, the Ministry of Economic Affairs and Competition has studied different legal and purely administrative options. Any administrative decisions can be adopted by the CNMV itself under the powers allocated to its internal regime, thus resolving the impasse that would derive from the end of the term of office of its senior officials.

When asked about the negotiations to modify the referendum proposed by the President of the Regional Government of Catalonia, the Vice-President of the Government clarified that neither the government, the Lower House, the Upper House nor Carles Puigdemont can negotiate on this issue because it is an issue that belongs to "the people of Spain as a whole".