Record banking profits boost tax collections by 30% | National and international economics

Spain’s big banks are smiling after ending the year with record profits, and the Treasury is doing the same as it looks ahead to future collections of an emergency tax on the financial sector. Banco Santander, BBVA, CaixaBank, Banco Sabadell and Bankinter earned just over 26 billion euros in 2023, up 26% from 2022.

Spain’s big banks are smiling after ending the year with record profits, and the Treasury is doing the same as it looks ahead to future collections of an emergency tax on the financial sector. Banco Santander, BBVA, CaixaBank, Banco Sabadell and Bankinter earned just over 26 billion euros in 2023, up 26% from 2022. 53% due to increased revenues due to higher rates by the European Central Bank (ECB). Thus, the state will increase its revenues in the second year at the current pace, which, according to the entities themselves, will increase by slightly more than 400 million.

The connection is direct between the tax and the increase in interest margins in Spain (+44%) and net commissions (-5%) of financial institutions. That is, tax calculations will be made on a much higher basis both this year and in subsequent years if this level of income continues. As an example, here are figures from each of the banks that reported 2023 results last week and industry forecasts for 2024.

In total, the five large groups will pay around 1.410 million euros in emergency tax this year. If we add the rest of the banks affected by the rate (Unicaja, Abanca, Kutxabank, Ibercaja, Cajamar and the French BNP), the figure rises to between 250 and 265 additional million. That is, the total amount of payments will exceed 1.650 million euros, which is 30% higher than 1.260 million in the previous year.

The tax was announced by Prime Minister Pedro Sánchez during the July 2022 State of the Nation debate. Since then, work has been underway on his final project, a task that continued until almost the end of the year. . The goal was to tax the extraordinary profits banks made from much sharper rate hikes than usual to fight inflation and thus pay for anti-crisis measures. The financial sector did not buy the rationale that benefits had fallen from the sky from the start, so they challenged it in court.

Despite this opposition, which still exists today, the bank expects the tax to become permanent, although it is at least trying to make changes to it. This was conveyed to him in meetings between the bank’s first swords and the Minister of Economy, Carlos Bodi. Among the possible changes, a change in the entry barrier for legal entities is being considered. The rule states that the tax will only apply to groups whose interest margins and net commissions in Spain exceeded 800 million in 2019, which sector sources consider discriminatory.

Among the large banks, CaixaBank is the one that will pay the largest amount in 2024. In particular, he will pay 500 million, which is 34% more, according to the organization itself. It is followed by Santander, which must pay out 338.5 million this year, 50% more than it received a year earlier (224 million). Then there is BBVA, which will pay 285 million euros (32.5% more), Banco Sabadell, whose payments increased by 21% to 190 million, and Bankinter, which will have to pay between 90 and 100 million euros, above 77.5 million. previous year.

The tax is paid in two installments: the first to the account in February, and the second in September. Each payment is half of the full expected payment amount. This provides an advance that can be reviewed later once companies have approved their final accounts and can make adjustments or reviews.

The emergency tax on the financial sector changed its character from the very beginning. It was not temporary, lasting two years, but the government agreement between PSOE and Sumar provided for the continuation of the tax in the event of the formation of an executive branch. So much so that after the inauguration, the government extended the rate and included in the resolution a commitment to make it permanent. A modification that has yet to be implemented. Something similar happened with the energy companies that were born at the same time and were also set up to be temporary. Of course, energy companies a priori managed to soften their rates, which the financial sector did not achieve.

About 3000 million income

In 2024, compared to 2023, the Treasury will collect about 3 billion euros thanks to emergency taxes on banking and energy. These are preliminary calculations presented by sources in the agency headed by Maria Jesús Montero, and assume a drop in revenues received from the energy sector tax.

In 2022, these two temporary figures together raised just over €2.9 billion, meeting the government’s original target. Since the country’s major banks have already announced that they will pay about 400 million more this year, the contribution of electricity, gas and oil companies is expected to be reduced by about 300 million compared to the previous year.

The expected trend is that the contribution of the energy sector will gradually decline in the coming years. The government is holding internal talks on how to integrate both taxes into the Spanish tax system, albeit with a modified structure. While the two sectors are fighting to reduce their tax base, conversations in the energy sector are the most advanced and have led to the PSOE welcoming a bonus in exchange for companies investing in the green transition. That is, the idea is that affected companies can deduct their strategic and decarbonization investments. The discussion, however, is not yet concluded, since Sumar completely rejects these postulates and demands that the tribute be kept unchanged.

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