Government works to make “extraordinary profits” tax permanent“From the banking sector, financial institutions react by cutting loans to businesses and families, which have already been reduced by 40,125 million euros since the PSOE and the Sumar government introduced this measure into our tax system.
The period analyzed runs from the end of 2022 to August of the current academic year 2024 and is supported by data offered by the Bank of Spain. According to these data, the reduction in the balance of credits granted to the private sector was particularly marked in the case of business financing, which decreased by 24.8 billion eurosalthough a decrease of 15.8 billion in mortgages was also noted.
In total, if consumer credit is included, the balance of credits offered by financial institutions to businesses and families goes from 1.174 trillion euros at the end of 2022 to 1.134 trillion euros in August 2024. In this way, the tax applied by The Pedro Sánchez government would have expressed its opinion decrease of over 40,000 million in financing that the banking sector contributes to the Spanish economy.
Already in 2022, Free market published various information in which the companies involved reported a notable contraction in the granting of credit. This newspaper, in fact, underlines that, according to industry sources, the tax on ”extraordinary profits” It would end with a financing of 50,000 million euros to the private sector.
In 2023 the tax applies to credit institutions brought with it approximately 1,695 million euros in revenues prosecutors. Assuming a similar figure for 2024, the exchequer would have obtained 2,825 million in 2023 and in the first eight months of 2024, while the credit would have been reduced by 40,125 million in the same period. This means that, for every euro raised, 17 euros of funding for the economy was lost.
Title: Taxing the Extraordinary: A Conversation with Financial Expert Dr. Clara Mendoza
Interviewer (Time.news Editor): Welcome, Dr. Mendoza. Thank you for joining us today to discuss the recent developments in the Spanish government’s push to make the extraordinary profits tax a permanent fixture in our economic system.
Dr. Clara Mendoza: Thank you for having me! It’s a critical topic that really impacts the economic landscape.
Interviewer: To start, can you give us a brief overview of what the extraordinary profits tax entails and its intended goals?
Dr. Mendoza: Certainly! The extraordinary profits tax is aimed primarily at taxes levied on the windfall profits of large corporations, especially in sectors that have benefited significantly from the economic disruptions caused by the pandemic and war in Ukraine. The government’s goal is to redistribute some of this wealth to support social programs and mitigate the economic impact on families and businesses.
Interviewer: Interesting. However, it seems this approach has had unexpected consequences. Reports indicate that since this policy was introduced, there has been a significant reduction in loans offered to businesses and families—over 40 billion euros. How do you see this affecting the economy in the long run?
Dr. Mendoza: That’s a very valid concern. When banks perceive increased taxes on profits, they tend to tighten their lending criteria to safeguard their margins. The data shows a drop of nearly 25 billion euros in business financing, which can hamper growth and investment at a crucial time. Companies might delay hiring or expansion plans, affecting the overall economic recovery.
Interviewer: And what about the impact on mortgages? The article indicates that mortgage loans have also seen a decline of approximately 15.8 billion euros. How does that affect everyday families?
Dr. Mendoza: For families, reduced access to mortgage loans can mean that many potential homebuyers will struggle to enter the housing market. It also places existing homeowners in a precarious position if they need to refinance their mortgages or draw on equity. The affordability crisis in housing can worsen if fewer people can access financing, leading to a stagnation in the real estate market.
Interviewer: Critics of the tax have argued that while it aims to address wealth inequality, it may inadvertently exacerbate the very issues it seeks to combat. What’s your take on this?
Dr. Mendoza: I completely understand that perspective. While the intention is noble, if small and medium-sized enterprises—key drivers of job creation—struggle to secure financing, the end result might be higher unemployment and reduced consumer spending. Essentially, we could end up harming the very communities that this tax aims to support.
Interviewer: What alternatives might the government consider to address extraordinary profits without stifling financial support for businesses and families?
Dr. Mendoza: One potential alternative could be a more nuanced tax structure that considers the financial health and lending capability of institutions. Additionally, implementing grants or subsidies for lower-income sectors, rather than a broad tax, could also alleviate pressure on lending while still capturing extraordinary profits.
Interviewer: That’s insightful, Dr. Mendoza. As we look to the future, how important is it for policymakers to strike a balance between taxation and economic support?
Dr. Mendoza: It is crucial. Policymakers must be laser-focused on economic dynamics, understanding that taxes can influence behavior—especially in finance. Engaging with economic experts and industry stakeholders can help guide these decisions to create a fair, sustainable system that encourages growth while addressing inequality.
Interviewer: Thank you for your insights, Dr. Mendoza. It seems clear that this is a complex issue that requires careful navigation. We appreciate your time and expertise.
Dr. Mendoza: Thank you for having me! It’s been a pleasure to discuss these vital economic matters with you.