Spain announces a temporary “ISF” on fortunes of more than 3 million euros

The Spanish government announced on Thursday a reduction in income tax for the middle classes and low wages to compensate for the effects of inflation on purchasing power, in a context of fiscal conflict with the opposition.

But unlike British Prime Minister Liz Truss, who announced massive tax cuts for the wealthy, the Spanish government will at least temporarily increase them.

The Budget Minister, María Jesús Montero, has announced this Thursday the general lines of a “solidarity tax on large fortunes” that should be in force in 2023 and 2024 in Spain.

This new tax will affect households with assets (real estate and financial) of more than 3 million euros, or 23,000 taxpayers (0.1% of the population) according to the estimate of the Spanish Government. It should allow to raise 1,500 million euros.

Measures at 30,000 million euros

Specifically, it will include three tranches: a rate of 1.7% for assets between 3 and 5 million euros; 2.1% between 5 and 10 million euros, 2.1%; and 3.5% for those of more than 10 million euros.

At the same time, the government of Pedro Sánchez (Spanish Socialist Party) has announced a one point increase in capital tax to 27%. Capital gains of more than 200,000 will be taxed at 28%, two points more than at present.

The Government, which has spent 30,000 million euros on its anti-inflationary aid plans, believes that the richest Spaniards must assume “their responsibilities and help mitigate the negative impact of record inflation”, said the Budget Minister, who thus aims to “practice tax education”.

In Spain there is already a tax on wealth. It taxes households that have real estate or financial assets of more than 700,000 euros. But it is the responsibility of regional governments and not the central state. Some regions do not apply it or have abolished it to attract wealthy taxpayers.

The new tax measures presented this Thursday by the Government also include a reduction of two points to 23% in the corporate tax rate for SMEs that reach a turnover of less than 1 million euros.