The PP and Vox pacts torpedo the inheritance tax, a weapon against the inequality of 3,200 million a year

The PP and Vox pacts torpedo the inheritance tax, a weapon against the inequality of 3,200 million a year

2023-09-01 22:42:32

The right has set the fiscal battle on its political agenda in recent years. And not just anyone. Mainly, against the taxes that tax wealth. The agreements closed during the last two months between PP and Vox confirm this drift and put obstacles to the future of inheritance tax in Spain. The alliances sealed in Extremadura, Aragon, the Balearic Islands and the Valencian Community include the elimination of this tax as the center of their fiscal policy for the next legislature or, at least, limit as much as possible who pays it. In Murcia, where the PP made an offer to Vox this Friday to govern together, the tax has already been reduced to 99% since 2022. This political battle against the tax on inheritances contrasts with the defense made by international organizations such as the OECD.

Madrid accumulates four out of every 10 euros forgiven in taxes assigned to communities


Inheritance tax gives communities more than 3,200 million euros per year. It is a state tax, but it is ceded to the autonomies, who have the capacity to regulate it. For years, the right has fought a battle in the regions that it governed in favor of its reduction, such as Madrid, Andalusia or Castilla y León. Now more names are joining this list after a 28M that dyed the map blue, thanks in large part to the support of the extreme right.

PP and Vox have sealed either governance or coalition agreements in Extremadura, the Valencian Community, Aragon and the Balearic Islands. In all these documents, the signatories have included the practically total elimination of the tax for inheritances between parents and children or between spouses. In addition, they reduce it for the most distant relatives.

In reality, inheritance is a tax that is already riddled with tax benefits. Tax tools by which the final invoice to the taxpayer is lowered for various reasons. In fact, in a majority of territories more money is ‘forgiven’ through these benefits than is actually collected. Except in two: Extremadura and the Balearic Islands. That is, it is a very limited tax.

Now, the new right-wing governments in these communities are expanding the battle, with the aim of reducing their collection as much as possible. It is a tax that has been on the political program of PP, Vox and Ciudadanos in recent years, who have come to call it “confiscatory”. In addition, the hoax has been spread that this tax causes people to have to give up their inheritances. Experts and data certify that it is not true.

Now, PP and Vox position it among the priorities of their different governments. In Extremadura and the Balearic Islands, in fact, they placed it as a measure to comply “in the first 100 days” of the Executive. Without going any further, in the community that Marga Prohens now presides over, the implementation of this tax reduction has already been approved, which will reduce the collection by 60 million and will benefit the highest incomes. In the four communities, PP and Vox have agreed to “eliminate” the inheritance tax by giving a 100% discount to most taxpayers.

The politics of the Spanish right-wing parties contrasts with the position of international organizations such as the OECD, which have defended its use. In a report in 2021, the organization positioned itself in favor of the inheritance tax, considering it a tool to “address inequality”. “Inheritance taxes, particularly those that target relatively high levels of wealth transfers, can reduce the concentration of wealth and improve equality of opportunity,” she asserted.

The report gave some statistical data to endorse his proposal to tax inheritances more. For example, in Spain, a person who is among the 20% richest in the country has a 54% chance of receiving an inheritance. If she is in the bottom 20%, the probability drops to 13%. In addition, the average inheritance of those who are in that first group, more privileged, is up to 60 times higher than that of someone who is in the second group.

The Balearic Government, however, has defended that its tax cut “benefits everyone”. The agreement with Vox, which is not part of the Government but is a key element in governance, already included the objective of “making the Balearic Islands the community with the lowest burden in Spain for this tax.”

In the right-wing fetish against taxes on wealth, the inheritance tax is always accompanied by the Heritage tax. This figure taxes the properties of the great fortunes, those who, discounting debts and their first home, have more than 700,000 euros, although in some territories the minimum is lower. The agreements signed between PP and Vox in recent weeks also call into question their future.

However, in this case it is more complicated. As with successions, the communities have the capacity to implement the bonuses they consider. Madrid historically has not collected it and Andalusia has recently joined. However, in the face of this race to the bottom, the Government approved last year and in force for this year and the next, the tax on large fortunes. It is a state tax that, in practice, will be paid in the communities that do not collect assets. In this way, those who have more than three million will pay the tax, yes or yes, and it will not be collected by the community, but by the central government.

For this reason, although the four agreements sealed between PP and Vox for the Government of the autonomous communities include their elimination, some have nuances. For example, in the Balearic Islands they agreed to its “progressive” reduction, although “subject to the repeal of the State Solidarity Tax for large fortunes approved by the State”. Or in Aragon they advocate reducing it “as long as the tax is not repealed.” Here, therefore, the nuances are more important than in the battle against successions.

In the wake of Madrid

The Balearic Islands, Extremadura, Aragon and the Valencian Community thus join the fiscal battle that the Community of Madrid has led in recent years, especially with Isabel Díaz Ayuso at the helm. There were regional presidents who came to speak of “fiscal dumping” by Madrid. That president, Ximo Puig, is no longer here, and his successor, Carlos Mazón, is committed to following in the footsteps of other communities governed by the PP. We must also take into account La Rioja or Cantabria, which do not have agreements with Vox but where the PP also promised to lower this tax during the campaign.

This battle between communities to see who has the lowest taxes coincides with the reopening of the regional financing debate. Some of these territories are demanding a better distribution of state revenue while cutting back on the taxes they have assigned. Meanwhile, the left has advocated in recent years for harmonization, seeking the implementation of state minimums that would prevent these taxes from being emptied. This is how the Minister of Finance of Asturias, one of the last autonomous governments in the hands of the PSOE, has defended it again this week. Guillermo Peláez advocated “opening the melon” of tax harmonization.

Last year a committee of experts presented to the Treasury its proposal for tax reform, which has been kept after the war in Ukraine, although the two parties of the coalition government – now in office – advocate recovering it. In that document, the problems of inheritance and estate taxes were addressed. “The complete decentralization of personal wealth taxation can cause its reduction to the minimum expression and, in the most extreme case, its total disappearance, as a consequence of tax competition between territories,” the committee pointed out, noting the possible implementation of a minimum throughout the country.

This harmonization proposed by the experts and defended by the left-wing parties is one of the points that should be addressed in a reform of regional financing. An added and complex front for this objective together with what to do with the debt of the communities or how to distribute the income from the collection of the State.

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