| 3 December 2023, Sunday |

Spain’s Socialists and Sumar agree windfall tax extension in coalition deal

Spain’s Socialist Party and the hard-left Sumar on Tuesday agreed policies that included expanding a windfall tax for banks and energy firms as they try to form the basis of a coalition government three months after an inconclusive election.

The deal also includes a proposal to reduce working hours while preserving the same pay. Their potential coalition still needs to win the backing of other parties in parliament.

The partners, who currently run Spain’s caretaker government, agreed all companies would be taxed an effective 15% rate on their accounting profit, Sumar leader Yolanda Diaz said in a speech, estimating additional annual revenues of 10 billion euros ($10.59 billion).

Companies currently pay between 23% and 25% on underlying profit, which seeks to eliminate the impact of one-off items.

“We will review the levies on banks and energy companies with a view to adjusting and maintaining them beyond their current period of application,” the parties said in the agreement. Annual collection from the two taxes would remain at the current level, added Sumar lead negotiator Nacho Alvarez.

The government imposed a two-year, 4.8% levy last December on banks’ net interest income and net commissions above 800 million euros ($880 million). For energy companies with a turnover of at least 1 billion euros, the rate is 1.2%.

Banking and some power companies’ shares fell after Tuesday’s announcement, with Banco Sabadell (SABE.MC) down 5.2%. and Endesa (ELE.MC) utility down 2.3%.

The coalition deal also proposes reducing the official working week to 37.5 hours from the current cap of 40 hours.

CEOE, Spain’s main employers’ association, said the deal would likely have a negative impact on businesses, especially small and medium-sized companies, the self-employed, and employment.

The leftist parties argued the deal would promote sustainable growth and “quality employment”.

They also said they would revise the targets for emission reductions upwards, and seek to reduce the volume of short-haul domestic air travel, encouraging people to travel by train instead.

While support from Sumar’s 31 lower-house lawmakers is crucial, it is not enough to secure the premiership for acting Prime Minister Pedro Sanchez. He still needs the backing of Catalan separatists, who are demanding an amnesty law to mass pardon people involved in the region’s failed independence bid of 2017.

If the Socialists and Catalan pro-independence parties fail to reach an agreement, Spain will face a repeat election in January in which voters could hand a centre-right and far-right coalition the absolute majority it narrowly missed out on in the July vote.

  • Reuters