'Tax washing': why Ibex firms say they pay extra taxes than they actually do | National and worldwide financial system | EUROtoday

When trying on the annual accounts of Ibex firms, it is not uncommon to discover a breakdown of all of the taxes with which they declare to contribute to the general public treasury. In 2023, if all of the ideas referred to are added, the 35 largest within the Spanish index contributed greater than 54,000 million, as proven by the information not too long ago compiled by PwC. The determine, curiously, is way increased than the 37,000 million that Spain collected in the identical yr by means of company tax, which is paid by hundreds of firms. How is that this potential? “Because the Ibex organizations, in a year of tax washingthey claim to pay taxes that are an inexorable part of their business model or that are not their responsibility at all,” explains Iñigo Macías, head of research at Oxfam Intermón.

Under the concept of total tax contribution, companies such as Ferrovial, Iberdrola, Repsol, ACS, Inditex, Santander, Caixabank, BBVA, Colonial or Enagás – to name just a few of the company reports compared by this newspaper – include in their financial reports the payment of corporate tax or environmental figures, but also the tax obligations derived from their own activity, such as VAT paid, IBI, social contributions to Social Security or withholdings on account of employees' personal income tax.

Under this scheme, companies divide the taxes that affect them into two groups. One includes “borne” taxes, that is, those that actually represent a real cost. The clear example is corporate tax, but also extraordinary taxes on banking and energy companies and green taxes. The other group includes “collected” taxes, which are those paid on behalf of other taxpayers as a result of economic activity, without this representing a cost for the company other than its management. An example could be the contributions and withholdings of the personal income tax of workers.

Thus, under this tax maelstrom, the Ibex takes on all the tax burden that directly or indirectly surrounds it and manages to increase its tax bill. In fact, according to the consultancy's own data, if only the joint payment of corporate tax by the 35 major companies is analysed, the collection in 2023 would have been close to 6.5 billion. If extraordinary and environmental taxes are added, the figure reaches 10 billion, a volume much lower than the 54 billion that are presumed.

The idea of ​​total tax contribution, Macías adds, “arose years ago as a response by companies to those political and social circles that questioned their real contribution.” What they did, he points out, “was to lump together taxes paid and collected in order to distract from what is truly important, which is the amount that is actually paid on profits.”

According to José María Mollinedo, secretary general of the Ministry of Finance Technicians' Union (Gestha), this practice is “misleading” and is intended to confuse the majority of citizens, “who’re unaware of the technical particulars of taxes.” When talking about tax contributions, he continues, “ideas are blended up that don’t correspond to the corporate's actual burdens.” This expert refers, for example, to “Social Security contributions, that are a deferred wage,” and to employee withholdings, “that are made primarily based on what these taxpayers should pay later.”

But there are more concepts. In the report Total tax contribution of the Ibex 35 in 2023prepared by PwC with information provided by companies, includes among the taxes collected —in addition to personal income tax and social security— withholdings on personal property and real estate, withholdings on non-residents, VAT, tax on tobacco products and taxes on hydrocarbons and electricity.

Mollinedo insists that it would be reasonable for companies not to take credit for these figures, since some are part of the wage cost and others are simply passed on to end customers. “The Ibex 35 companies do not smoke,” Mollinedo says ironically. “The tax on tobacco products is a tax that ends up being borne by smokers.” Francisco de la Torre, State Tax Inspector, is of the same opinion: “The taxes on hydrocarbons or tobacco are paid by companies to the Treasury, but that does not mean that they bear them, since they pass them on to the last cent by the man who smokes a pack of cigarettes.”

PwC sources argue that “measuring corporate taxation by considering only corporate tax is a limited view that does not reflect reality, because it leaves out of the analysis the majority of the tax cost.” Although some of the taxes mentioned do not erode the result, companies assume a risk in their management “since they have to calculate, declare and pay them, assuming sanctions in case of inaccuracies.” In addition, companies “generate the value” that allows the Treasury to obtain these revenues.

However, Mollinedo believes that with these practices companies have found a goldmine with which to build their story. “The Ibex claims to make a fiscal contribution of this magnitude, and as there is a great lack of knowledge on the subject, many may think that they are really paying a lot.” With this breeding ground, he adds, it is easier for them to negotiate tax reductions or to make people believe that the new extraordinary taxes on banks and energy companies, to cite a recent example, are an abuse. Companies such as Iberdrola, for example, aired this concept to attack the tax. Ferrovial, for its part, boasted of its total contribution in Spain when it announced the controversial transfer of its parent company to the Netherlands.

The inspector continues that large companies are a centre from which taxes are collected on a massive scale, “there is no doubt about it”. But these are often passed on to third parties. “There are figures such as corporate tax which obviously represent a cost for the company, but there are others, such as social contributions, which are not technically a tax”, he adds. “It is always welcome to contribute to fiscal transparency, but there are concepts which in this case are debatable”.

The biggest tax that companies in Spain really bear is the corporate tax. And, in recent years, companies have been able to get it calculated on a part of their profits and not on their total earnings. Last year, all Spanish companies recorded a net profit of almost 300 billion euros. However, of that volume, only 176.5 billion (58.8%) ended up in the amount to which the corresponding tax rate is subsequently applied. This is something that organizations achieve thanks to tax credits and exempt income.

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