Spanish tax investigation. Taxes are just a fact of life, wherever you live. In fact, sometimes, the luckier you have been in life, the more worried about taxes you must be. Residency, marriage, family, profession… Everything seems to impact how much we pay, and this can generate anxiety. Tax authorities sometimes seem like a black box, as we are unaware of its goals, and we wonder why certain activities are punished when others are allowed to prosper.
Tax is, in other words, a mystery.
However, from time to time, as citizens we gain glimpses into what tax investigators actually do. This has been the case of Spanish government for some years, which has launched intensified action plans against tax fraud. As an expat seeking to move to Spain or someone who is already there, you might be interested in knowing more about the Spanish Tax Agency.
Inside the black box: Incentivising the tax-collecting machine in Spain the wrong way
In 2013, for instance, the Spanish Tax Agency launched for the first time an Intensified Action Plan against fraud, which ended in 2016. The Plan included incentives such as productivity bonuses for those taxi inspectors who increased the collection rate. With a special budget of half a million euros, officials were made to work overtime and encouraged to open as many cases as possible.
However, voices in civil society, like the tax advisors’ association, criticised the plan. This is because it was seen to incentivise arbitrary and confiscatory behaviour within the tax inspection body. What does this mean? Basically, that inspectors would assess cases without following principles of non-discrimination and progresiveness that are supossedly inherent to tax agencies. Rather, they were encouraged to select cases according to their assumptions and expectations, judging where more money could be made.
Its effects were considered positively by the government. Unsurprisingly, collections by the tax body increased by more than 10% when compared with the previous year. As a result, the agency reinvested this money for future incentive plans.
Again, however, organisations have denounced that these incentive plans harm tax collection. This is because they nudge inspectors towards a limited number of cases which are expected to be easier to solve. This sidelines other, longer-term cases which require more resources to be investigated and, remarkably, could generate even more revenue for the agency. This undermines equality, as the former usually have fewer assets than the latter.
Tax planning is the best antidote against arbitrary tax collection in Spain
As you can see, tax collection can turn into a very dubious business, particularly in times of crisis. The taxpayer is often unaware of these changes and incentives, being at the mercy of the government of the day’s priorities. Sadly, rather than going after the big fish, sometimes tax agencies prioritise what they see as easy targets; such as foreigners and expats who are less familiar with the language and the culture.
In the end, the best option is to conduct tax planning early on. Lawyers at Del Canto Chambers have successfully won cases against powerful banks and the administration on behalf of many clients. Even the most difficult situation can be fixed or improved with the right legal advice. Contact us and make sure that your activities in Spain are compliant with local laws and regulations.
Spanish tax investigation. By Del Canto Chambers
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