European Commission orders Catalonia to cancel tax on large-sized shops

Barcelona (ACN).- The European Commission has warned Spain that 6 Autonomous Communities, including Catalonia, should cancel their tax on large-sized shopping centres because it may represent indirect State aid benefiting smaller shops and therefore damaging free competition, they argue. The Catalan Minister for Business and Employment, Felip Puig, announced legal actions to defend this tax, which was validated by the Spanish Constitutional Court, he stressed. Catalonia’s shopping model has a great presence of small and local shops, mostly owned and run by families, who also tend to employ a small number of people. Thousands of employees work in these small shops, which generate much more jobs than the large-sized malls. In addition, local retail also generates economic activity in many neighbourhoods and small towns. Indeed, these small shops are also part of the collective identity of these neighbourhoods and small towns, often offering a specialised and personal customer service, as well as unique products. In order to protect this model and make it compatible with the opening of new shopping malls and large-sized international shops, the Catalan Parliament created in 2000 a tax on the shops that were larger than 2,500 square metres. Currently, this tax forces them to pay €17 per year per square metre. The revenue collected is devoted to actions and programmes promoting and assisting local retail.

A tax that damages free competition, argues Brussels

On Thursday, the European Commission’s Spokesperson for Competition, Ricardo Cardoso, stated that “the exemptions granted to small shops, and some specialised ones, may represent State aid”. This could damage free competition, as it creates a disadvantage for the large-sized shops. In addition, the reason for creating the tax, which was to compensate the environmental and town planning costs of shopping malls, do not seem to be backed up by any study that states that small shops have a lower impact on the environment and urban planning than large-sized outlets, highlighted the Brussels-based institution.

The European Commission received a complaint from an association of large-sized shops in Spain, which denounced the tax which is present in 6 different Autonomous Communities with some small variations but sharing a greater number of common elements (Catalonia, Navarra, Asturias, the Canary Islands, Aragon and La Rioja). The Commission Spokesperson stated that if the tax is cancelled or vastly modified and the association withdraws its objection, a formal investigation on the matter will not be launched.

However, the European Commission could launch an investigation that could end with a fine and make the beneficiaries of the State aid (small shops) have to pay the amount which they benefited during the past years. This last scenario would be quite difficult to calculate shop by shop, but could force many small shops to pay large amounts of money to international companies.

The European Commission “welcomed the constructive attitude of the Spanish authorities” to deal with the “concerns on State aid”. Cardoso underlined that Member State Governments have the powers to decide on their fiscal and taxation systems, but even in this area where they have exclusive powers, they have to respect the EU regulations on free competition. The European Commission believes that taxing large shops might represent an arbitrary advantage for small shops and for companies owning shops that are smaller than those of its competitors that are above the surface area limit. 

The Catalan Government defends its tax

The Catalan Minister for Business and Employment defended the Catalan Government’s fiscal autonomy in matters related to local commerce and retail. On Thursday afternoon, Puig said he was worried about whether the Spanish Government would sufficiently defend this tax in before the Brussels’ authorities. In addition, he pointed out that the Constitutional Court had validated this tax, after the Catalan Government had carried out “an important legal battle” to defend it. Puig insisted that the European Commission’s demand is “not a definitive one” and highlighted that the situation is currently an “open” one. In addition, he announced that the Catalan Executive will not give up and will defend its tax with legal action if needed.