Spain’s biggest banks prepare to challenge windfall tax
Lenders say they will make the first payment due next month but are ready for legal action
Spain’s biggest banks will challenge the country’s controversial windfall tax after they have made the first payment next month, according to people familiar with their plans.
The levy was proposed last summer by Spanish Prime Minister Pedro Sánchez to raise €3bn to cushion people from surging energy prices. Several other European governments have targeted the profits banks have made from rising interest rates.
But Spanish lenders have decided to challenge the tax authorities after paying their first instalment by February 20.
“This will almost certainly end up in court,” said a senior executive at one of Spain’s biggest banks. “We have to do this in the interests of our shareholders.” Bank share prices were hit when the tax was announced.
Santander and BBVA plan to challenge the tax, according to people with knowledge of their thinking, while Bankinter and Abanca have publicly said they will. The boards of Sabadell and CaixaBank have yet to decide.
While the windfall tax is unpopular with Spain’s banks, it has also been criticised by the European Central Bank, which argued it could damage bank capital positions, disrupt monetary policy and be difficult to enforce.
Spain’s Socialist-led coalition government intends to impose a 4.8 per cent tax on banks’ income from interest and commissions for two years, arguing that rising interest rates have handed “extraordinary” profits to the sector. It has proposed a similar levy on energy companies.
The Spanish Banking Association has argued that if banks are forced to pay €3bn in taxes, it would reduce their lending capacity by €50bn because it would cut the amount of regulatory capital they can hold against those loans.
When the tax was announced, shares in CaixaBank, Bankinter and Sabadell fell by more than 10 per cent, while those of Santander and BBVA, the country’s two biggest banks by market capitalisation, but with significant business outside Spain, dropped by nearly 4 per cent.
Hungary and the Czech Republic have also announced extra taxes on banks to reduce the impact of energy prices.
Spanish banks have two options they could pursue, according to legal experts. The first is to appeal against the tax authorities in an effort to reclaim the money after they have made their first payment.
The second is to mount a challenge in the National High Court against the ministerial order setting out the tax, which is due to be published imminently.
Both options are likely to lead to years of legal battles that could ultimately end in Spain’s constitutional court or the European Court of Justice.
Bankinter chief executive Maria Dolores Dancausa has said the bank will decide the technical basis on which to appeal after paying the first instalment, while Abanca chair Juan Carlos Escotet said on Friday that the bank would challenge what he called a “clearly unconstitutional” tax.
Santander, BBVA and CaixaBank declined to comment. All three are reporting this week.
The finance ministry said: “We are convinced that the bank levy has been passed in compliance with the law.”