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Protesters outside the Supreme Court this week.
Government forces banks to pay mortgage-loan notary tax

Government forces banks to pay mortgage-loan notary tax

This swift move follows this week's Supreme Court decision that overturned a ruling by one of its own judges and which said that customers still had to keep on paying the charge

SUR

Friday, 9 November 2018, 14:13

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In a move to silence a growing public outcry and gain political advantage, the prime minister, Pedro Sánchez, held a hurriedly arranged press conference on Wednesday to announce that the government would change the law to force banks to pay a tax on mortgage loan transaction paperwork.

A royal decree to that effect was approved at a cabinet meeting on Thursday and the law change was due to be published in the official state bulletin (BOE) today, Friday, coming into force on Saturday.

The announcement came less than 24 hours after a meeting of Supreme Court judges in Madrid had narrowly voted to rule that it should be the customers taking out a mortgage who should continue to pay the increasingly controversial charge.

The widespread discontent over the tax, known as the Impuesto de Actos Jurídicos Documentados, has grown from nowhere over the last few weeks. The fee is levied on a broad range of documents processed by a notary, not just mortgage papers, and is a variable percentage charged depending on the money mentioned in the loan paperwork.

Up to now banks have been charging their customers the tax, which varies by region. Experts say it can be between 1,000 and 4,000 euros on a typical mortgage.

Court finds against banks first

A Supreme Court ruling was published last month which said that, as the bank was the party in the deal asking for the documents of the loan to be registered, then it had to be the bank that paid for the tax.

The minute that first judgment was announced on 18 October, bank shares fell amid fears that refunds would be due on existing mortgages as well.

Dramatic backtracking

However, with signs of internal disagreements at the highest level of the Supreme Court, an unprecedented decision was taken to summon all the judges responsible for hearing cases linked to the public administration to meet on Monday, 5 November, to debate and then vote on whether their colleague's decision should stand or not.

By the time the judges' meeting arrived this week, public interest had grown to such an extent, with claims that the judges were trying to protect the banks' interests, that no political party had dared to show support for the banks continuing to pay.

The judges' meeting went on all of Tuesday as well. And when the final vote came it was 15 in favour and 13 against the customer continuing to pay.

Analysts said that had the decision gone against the banks and been retrospective, the banks stood to lose up to 16 billion euros.

Consumer rights' group Facua said the verdict was "absolutely disgusting", as the debate swung from the courts to the politicians.

Government steps in

By midmorning on Wednesday, Pedro Sánchez had his response ready. "The government respects the independence of the Judiciary but as the Executive we cannot avoid feeling sorry about this situation," he said.

The opposition PP party said it would have gone further and abolished the tax altogether and that the government shouldn't "fool" Spaniards, as the banks would just put up charges elsewhere to compensate.

Shares in the banks rose between one and four per cent on the Spanish stock exchange on Wednesday.

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