Montoro's poisoned inheritance in the Treasury

BarcelonaCristóbal Montoro, the longest-serving Minister of the Treasury in history (he held the position under José María Aznar as president from 2000 to 2004 and under Mariano Rajoy from 2011 to 2018), is charged along with 27 other people with alleged bribery, fraud against the public administration, and his alleged relationship with senior officials and the firm he founded, Equipo Económico.

But, in addition to saving large companies millions of euros through his influence on tax legislation, he left behind a legacy of tax regulations that were subsequently invalidated in whole or in part by the courts, which represent and continue to represent a gigantic bite into public revenues. The Independent Authority for Fiscal Responsibility (AIREF) has estimated that the cost of adverse court rulings borne by the State between 2014 and 2023 is approximately €1 billion annually.

Individuals have the option of accepting inheritances with the benefit of inventory, that is, without being obligated to pay the debts and other encumbrances of the legacy, but only to the extent of the assets contained therein. But the public treasury cannot do this, as it must bear the responsibility for blunders and errors, even if they originate from previous governments. Estimates from the Ministry of Finance put the cost of these legal setbacks at more than €11 billion. And the courts are ruling in favor of the affected companies, invoking, for example, a ruling by the Constitutional Court in January of last year that declared unconstitutional provisions established in a 2016 Royal Decree Law reforming corporate tax and limiting the offsetting of negative tax bases or the application of double tax deductions.

The Spanish government, which implemented modifications last December to avoid further problems in the future, estimates that this could cost it more than 2.8 billion euros. In fact, numerous rulings from the Administrative Litigation Division of the National Court in favor of Ibex companies reveal this. One of these rulings resulted in the return to Telefónica of more than 1.3 billion euros, 790 million euros for overpaid amounts from 2008 to 2011 and 526 million euros for late payment interest. Orange (now MasOrange) estimates that it owes 180 million euros, and Mapfre, 100 million euros.

But this is not the only case. There have also been criticisms from the European Court of Justice (CJEU), such as with the regional hydrocarbon tax bracket from 2013 to 2018, which it invalidated following a Supreme Court ruling. It was created in 2012 and repealed in 2019 and replaced with another scheme within regional financing. The cost, in this case, is estimated by the Treasury at around 5.8 billion euros. It was also the European Court of Justice that declared the penalties for failure to comply with the declaration of assets abroad imposed in 2012 through Form 720, which reached 150% of the value of the assets, "disproportionate." In that case, the impact would be around 230 million euros.

The Supreme Court also struck down one of the measures from Montoro's time as Finance Minister. Specifically, it invalidated the hydraulic fee for the use of inland waters to produce energy, which was charged retroactively to electricity companies in 2015 for the years 2013 and 2014. The cost of this legal setback amounts to 1.907 billion euros.

Image cost

There have also been other slaps on the wrist that haven't had an economic impact but have had an impact on the country's image. For example, the Constitutional Court's ruling in June 2017 invalidating the tax amnesty implemented five years earlier, which was even exploited by some political heavyweights such as Rodrigo Rato, the all-powerful vice president of economics in José María Aznar's government.

The court ruling, which rejected the use of a decree law for a measure of this type, promoted by an appeal from the Socialist group, would have no impact on the majority of the 30,000 beneficiaries, who could sign up in exchange for paying a 10% tax. Some 40 billion euros surfaced, but the Treasury only managed to collect 1.191 billion, 3% of the total, since a large part of the declared assets had already expired.