A week of capital gains and ‘dumping’ ends. The Spanish learn economic terms at a forced pace. In the 2008/2015 crisis they learned the concept of “risk premium”, a distant relative who visited us and stayed for a few years in the living room of the house looking at the television. Do you remember?
This week we have received Doña Plusvalía and Don Dumping. They came at snack time as friends used to do. Back then it was customary to let them know if they were going to visit a family so that they had time to prepare something to entertain the visitors (if possible hot chocolate with homemade muffins). It was rude to show up unannounced.
How polite people, the added value/dumping couple had been advising of their visits.
Doña Plusvalía did so in 2017 and in 2019 when the Constitutional Court (TC) indicated that the municipal tax on real estate capital gains was unconstitutional and had to be reformed. For this reason, he appeared on the occasion of his sentence of unconstitutionality.
Don Dumping was also warning. Some think it was because the president of the Community of Madrid arouses envy, inside and outside her party, for her liberal policies. Others, because their low taxes harm other autonomies.
The Government has entertained Doña Plusvalía during her visit with a Decree Law that regulates the legal vacuum left by the ruling of the TC.
By declaring the tax calculation system unconstitutional, and there being no substitute regulation, it was not known whether it had to be paid and, if so, based on what criteria to pay it.
The adopted solution seems reasonable: that the taxpayer chooses whether to pay that tax for the real capital gain (the positive difference between the sale price minus the purchase price) or the coefficients set by the city council over the years. This respects the criterion of “expanding the economic capacity” of the taxpayer. If that capacity is increased, it is paid, if it is not increased, no. Hot chocolate. Thick, warm and pleasant.
But the accompanying homemade muffins aren’t nearly as appetizing. According to the TC, people who have not claimed for excessive payments in the liquidation of the tax prior to the date of the ruling of unconstitutionality will no longer be able to do so. Reasonable? Based on what legal principle? That will take legal action. Not before the Spanish Courts, since the TC is its highest body. But yes before the EU. Already we will see what Strasbourg says. It’s going to be a botched legal mess. The TC has not dared to make a fiscal hole to the City Councils. But instead he has created a legal uncertainty of a European nature.
The Don Dumping thing is funny. The last notice of him has been through Mr. Urkullu, the lehendakari. Mistake! But how can the president of autonomy complain about Madrid with the most unique and anachronistic system in all of Spain? I am sure that Urkullu will defend his regional quota system tooth and nail. His last argument would be that it is constitutional. Take it, like Mrs. Ayuso’s!
But how can the president of autonomy complain about Madrid with the most unique and anachronistic system in all of Spain?
Using the word dumping, which sounds like an entanglement, maneuver or trap, is typical of disqualifying campaigns widely used in Spanish politics. Look for a name that makes what others do seem bad.
Dumping is the use of fiscal or other instruments to make unfair competition to others and harm them. It presupposes that the others cannot defend themselves because they cannot use them. Which in this case is not true. All the autonomies can do with their taxes what Mrs. Ayuso does in Madrid. Besides, who said that this is bad for others! If Madrid grows, so do the others that are economically interrelated with it. Madrid competes with London, Paris… and if it attracts investment it is good for all of Spain.
The visits from Doña Plusvalía and Don Dumping have been noisy. But they have not been the only ones. The labor counter-reform has also visited us. So far it has not passed the hall. In the coming weeks it will go to the room. Will there be a brawl?