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Spanish “Government By Decree” Continues To Hinder Investment

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Spain wants to attract foreign investment, yet the supposedly “pro-business” government continually makes these idiotic and egregious faux pas that reminds everyone that Spain remains solidly a Fifth World country.

The story – in Spanish – explains that the Spanish Treasury has decided to levy fines on multinationals that aggressively plan their cash flows and holdings to minimize their tax liabilities. This practice is perfectly legal and perfectly ethical – managers are maximizing shareholder value after all – but rather than changing the tax laws to eliminate loopholes and working with European partners to harmonize corporate tax rates, no! Spain decides on the confiscatory, arbitrary fiat; government by decree and damn the legality of what these companies are doing.

MontoroThe Treasury Department will assess “preventive fines” from between 50% to 150% of the estimate of their own experts on what the multinational should pay the Spanish government. This is commonly known as “an extortion racket” and is more usually associated with the Mafia and organized crime. “Preventive fines” – in other words, prior to the fact. They might as well give out “preventive traffic fines” to all drivers, or “preventive jail time” to random Basque citizens. The government’s disregard for their own laws is truly stupefying.

Of course it is true that Spain is in desperate need of additional tax funds. Despite the glowing pronouncements of the government (when have we heard anything different?) the economy remains very much in the doldrums; industrial activity continues to decline, real estate sales decline, new credit originations decline; the only thing that is increasing is the size of the bad loan book. And, of course, all of the rag-tag cronies and political hanger-ons at every level of the Byzantine Spanish public administration need to be paid their salaries and perquisites; from the vast number of unnecessary municipalities to the semi-feudal autonomous communities, these creatures multiply and drain the public treasury like leeches, but God forbid that any of them lose their jobs. That is not how the political system operates here.

Spanish companies take advantage of this situation as much as anyone, soit will be interesting to see if any of them are included in the government’s targeted list or whether this is merely another xenophobic fleecing of the foreigner. In the latter case, Spain should at a minimum be taken to the WTO and subjected to a thorough thrashing, and retaliatory action considered against Spanish companies. Given that the only sector of the Spanish economy that is even remotely active is the export sector, this is perhaps the most effective means of bringing pressure to bear on the hypocritical misanthropes in the government.

Sources and Notes:

Hacienda multará la ingeniería fiscal de multinacionales como Google,Datos macroeconómicos, economía y política
2 Photo from Pulso Digital

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One Response to “Spanish “Government By Decree” Continues To Hinder Investment”

  1. I am very surprised how a non-spanish born – while you lives in Spain – can have a so fine view of what happens in Spain while this is so difficult to find in Spanish media.

    Anyway, let me complement your writing with other words because I do not need to be political correct.

    Mode of action about you comment is deeply rooted in Spanish tradition. Laws are created not bearing in mind to create stability or rules for fair play. They are sistematically created as tool be used ‘against my enemies’. Every local knows how this, like many others laws, will be used arbitrarily to hinder competitors of my friends and help them maintain its private preserves (‘cotos privados’).

    Posted by MSR | April 22, 2014, 12:08

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