Spanish authorities ban Catalan tax on overall bank deposits, which brought in €680 million in 2014

Barcelona (ACN).- The Constitutional Court has accepted to debate the Spanish Government's last appeal against the Catalan Executive's tax on bank deposits, which has to be paid by financial entities depending on the amount of their overall deposits and the number of branches they have. Such a decision represents the automatic suspension of the issue appealed against (in this case the tax) for an initial period of 5 months. Catalonia approved such a measure in December 2012 and immediately after, the Spanish Government approved its own tax with a 0% rate, so it was 'de facto' cancelling the Catalan tax and that of other Autonomous Communities approved at an earlier stage. Under Spanish legislation, when the central government approves the same tax as that of an Autonomous Community, the regional tax is automatically cancelled and the Spanish Government has to compensate for the loss of revenue. However, in this case the Spanish Government refused to compensate Catalonia, since it argued that the Catalan tax had not entered into force yet and took the issue to the Constitutional Court.

The Catalan Government had approved the tax in mid-December 2012 and it was supposed to enter into force on the 1^st of January 2013, but two weeks after, on 28 December, the Spanish Government approved its own tax to cancel that of Catalonia. In addition, it decided not to compensate Catalonia, which was claiming some €500 million in 2013 as compensation, and instead filed an appeal to the Constitutional Court.

The Court initially accepted the Spanish Executive's appeal and the tax was temporarily suspended, but in May 2013 it was lifted. In July 2014, the Spanish Government modified the tax with a 0.03% rate, aiming to spread the revenue throughout the whole of Spain. In addition, in December it presented a new appeal against the Catalan tax.

Meanwhile, the Catalan tax has been in place and in 2014 it brought in some €680 million in revenue. However, most of the banks decided not to pay it, using the Spanish Government's appeals and actions as an excuse, and instead filed guarantees.

Now, the Court will have to decide on the new appeal and the tax has been suspended for an initial period of 5 months, which can be extended. The Catalan Government had included the tax in its budget for 2015 and it was supposed to bring in €625 million. If the tax is finally cancelled and no compensation is allowed, the Catalan Executive may face the problem of finding the €625 million, due to the Spanish Government's actions.

Catalonia's tax was approved in late-2012 as a measure to reduce the public deficit without further reducing public expenditure and the quality of public services. It was part of the parliamentary stability agreement between the governing centre-right pro-Catalan State coalition CiU and the left-wing Catalan independence party ERC. Now, the ERC is asking the Catalan Government to continue implementing the tax, following the previous decision of the Court from May 2013.