The one-off tax on Spanish banks announced by Pedro Sánchez this week is an attempt to show that his coalition is driven by at least one solid left-wing principle: take from the wealthy to make things better for the less well-off. But the precise justification and the likely effects of this tax bonanza - to which Spanish utility behemoths such as Iberdrola and Endesa will also contribute - are far from clear.
The Socialist leader claims that Spanish banks are already profiting to an "exceptional" degree from the country's historically higher interest rates. According to the Spanish Banking Association, though, recent profits aren't substantially bigger than normal. Even assuming that the government's right on this point, how, if at all, do the increased earnings justify the precise rate of the one-off tax?
Sánchez says that the two-year tax will apply to companies with a turnover of more than one billion. Theoretically, then, it applies to ALL businesses that can "afford" to give the government more money, not just those presented as unfairly gaining from punitive interest rates. When Canada's liberal prime minister, Justin Trudeau, announced a similar one-off tax after winning last September's general election, the country's banks said they had been unfairly singled out. Spain's financial sector could make the same point if the new levy isn't applied to companies in other industries with comparable turnovers.
Another key question is whether the money raised by this emergency tax will be better spent by the government than it would by the banks themselves. It's hard to see how building extra housing in Madrid and making train journeys free between September and December (?!) will have a lasting effect on Spain's poorest households. Would it not be better (in the sense of more streamlined and effective) if the banks themselves redirected the extra money - say into training courses for the unemployed, or to provide cheaper services for their customers?
Share prices in Spanish banks are already tanking, showing the impact of the new tax on the international investment community. This was also one of the concerns expressed by the Canadian financial sector when Trudeau announced his windfall tax.
Banks aren't in the habit of watching their margins being eroded by leftist governments, so they'll recoup their lost profits from somewhere. But how will their reactions in turn impact their thousands of employees and hundreds of thousands of customers? Higher costs for financial services and mass redundancies are two possibilities - and two ways in which this initiative could have an unintended, negative impact on Spanish households.