Bad for business

Spain's economy might be the fastest-growing in Europe, but its tax system needs a complete overhaul - as highlighted by an aggressive new advertising campaign in a major British newspaper.

In last weekend's edition, the Financial Times (FT) ran a full-page advert by the international law firm Amsterdam & Partners. Headed "Win. Win", the column on the left informed readers that Spanish tax inspectors "get a bonus whether they win or lose an unfair tax case"; while the opposite bar, entitled, "Lose. Lose", claimed that "unfair tax demands have to be paid immediately" and that "fighting for justice costs you even more."

Small text underneath rammed the message home. Tax inspectors in Spain, the advert pointed out, receive bonuses tied to performance indicators, among which are collection targets. Inspectors receive these bonuses even if their decisions are subsequently reversed by courts (as almost half of them are), resulting in a system that is rigged to benefit the state and punish the taxpayer.

Had this advert been published in any major British newspaper, it would have caused Spain's tax office reputational damage. But its appearance in the FT will ensure that the negative publicity has even greater impact. The paper reaches 21 million powerful, wealthy readers every month: 56% are business decision-makers, 75% work for international companies and 23% are millionaires. They're precisely the kind of foreign investors that Spain wants to attract, not repel (although many may already have been put off by the country's anachronistic wealth tax).

Amsterdam & Partners aren't the only ones to have recently criticised Spain's complex, punitive tax legislation. A written question submitted to the EU Commission in May by Jorge Martín Frías, an MEP for Vox, concerned "perverse incentives from the Spanish Tax Agency's Bonus Schemes". Frías pointed out that in 2023, productivity bonuses amounted to €267 million, even though Hacienda loses 40% of the court cases brought against it. He asked the Commission to assess whether these bonus schemes "jeopardise the [taxpayers'] rights [that are] protected by the EU Charter of Fundamental Rights."

These attacks on Spain's Hacienda come a couple of months after the Washington-based Tax Foundation published its annual International Tax Competitiveness Index. Spain retained its 2024 ranking of 34 out of the OECD's 38 countries, drawing criticism for a complicated, uncompetitive system that punishes both corporations and individuals. According to one of the report's authors, the only thing that's preventing Spain from becoming a "tax hell" is competition between the regions, many of which have exercised their fiscal autonomy to lower personal and corporate rates.

The 19th-century American showman P. T. Barnum is usually credited with coining the phrase "There's no such thing as bad publicity." Amsterdam & Partners' FT ad shows how wrong he was.