The International Monetary Fund (IMF) advised developed countries last Monday to raise taxes on companies with excessive profits to help mitigate this crisis. While the economy is once again looking into the abyss as a result of the war in Ukraine and the energy crisis, the Tax Agency published a report on Wednesday that shows the fiscal effort of Spanish multinationals in the world. The 124 companies with a turnover of more than 750 million euros paid a global effective rate of 16.7% of their profits in corporate tax, according to data released by the Treasury for the year 2019. The effective rate of 16.7% paid by Spanish multinationals in 2019 for their global profits is even lower than the previous year when they paid taxes on 18.3% of their profits.
This tax rate is far from the nominal corporate tax rate in Spain, set at 25% for most companies and 30% for banks and oil companies. The difference lies in the complex system of deductions and exemptions enjoyed by Spanish multinationals in some jurisdictions and the tax engineering they carry out to legally transfer profits from some countries to others that offer more tax advantages.
The information published this Wednesday reveals that the large Spanish groups paid a total of 14,965 million euros for corporate tax globally, after registering a profit of 89,701 million euros, according to data compiled by the Tax Agency of the Country-by-country report (CBC, in its acronym in English), a declaration that these companies have to present with the figures of their businesses and tax payments in all the countries where they have businesses. Treasury has been publishing this batch of tax data for four years. This information is based on the commitment signed by Spain with the Organization for Economic Cooperation and Development (OECD) within the framework of the BEPS project (erosion of tax bases and profit shifting). It is an ambitious plan that has been signed by more than a hundred countries that tries to make large companies pay taxes where they do business. As a result of this international project, an agreement signed by more than 130 countries was reached last summer to establish a minimum type of company of at least 15%.
The 124 Spanish multinationals declared that they owned 14,753 subsidiaries (9,810 are foreign). These added a global turnover of 933,842 million during 2019, according to the information declared by them to the treasury. To account for the volume of total income harvested by these delegations in the world from Spanish parent companies, they represent close to 75% of Spain’s GDP in that same year. The information published by the Treasury does not allow knowing the name of the companies, not even in which countries the subsidiaries are located, so it is difficult to draw many more conclusions than the difference in taxation in Spain and abroad. However, the Tax Agency does have this data that it uses for tax control.
They pay less in Spain
The official statistics show a great divergence between groups of companies. One in three large Spanish companies paid taxes for less than 10% of their global profits. The 23 multinationals that contributed the least paid only 2.6% of their global profits in corporate tax. These companies represent 18% of all Spanish multinationals, but accumulate 20.8% of sales, 17.2% of overall global profit, 22.2% of the total workers of all these corporations and gather 14 .7% of the capital.
He knows in depth all the sides of the coin.
“In the statistics you can also see how, according to what was declared by the companies in the Country-by-country report (CBC, the effective rate paid in Spain by the 124 multinationals stood at 13% during 2019, which is almost 8.5 points less than what was paid by the same group in non-EU countries (21.4% )”, as explained by the Tax Agency in the Country by Country Report. The Treasury elaborates on how Spanish business groups concentrate more than half of their global turnover (55%) in Spain, while a third comes from outside the European Union. Against this, these companies declare that in Spain they only obtain 42.9% of their profits and pay 33.3% of the global corporate tax.
A minimum rate of 15% in corporate tax
The Government of Sánchez has proposed since it reached La Moncloa to set a minimum rate of 15% in corporate tax. After the financial crisis of 2008 and the sovereign debt crisis of 2012, public coffers were depleted. The collection of companies fell by half and the debate on the contribution of companies intensified. After several attempts, the Minister of Finance, María Jesús Montero, managed to include that minimum tax of 15% in the General State Budgets of 2022. But that limit is applied on the tax base and not on the accounting result. The effective average rate paid by these companies on the tax base is 21.5%, according to the latest official statistics. If the calculation is made on the benefit, the rate drops to 9.5%, because it includes the dividends of the subsidiaries abroad, where they already pay, and other concepts.
The difference means that it only affects less than 1% of all Spanish companies, some 12,000, according to calculations from Treasury sources. So the effect will be limited for the public treasury.