Spain’s €3bn windfall tax is wiping out a large chunk of the profits of companies with the smallest global presence, pushing oil group Cepsa into losses and tarnishing CaixaBank’s results.
The Socialist-led government’s tax on big banks and energy groups, which are challenging the levy in court, is levied not on profits but on revenues and only on the Spanish assets of companies headquartered in Spain.
CepsaSpain’s second-largest oil group said on Friday it took a €323m charge on its 2023 extraordinary tax bill, erasing all its profits and leaving it with a net loss of €297m in the first quarter.
Caixa BankSpain’s largest deposit lender, said the windfall gains tax cost €373m, or 44% of the €855m net profit it recorded for the three months to March.
Because both companies do most of their business in Spain, taxes were much higher than profits than those of Spanish multinationals such as Santander and Iberdrola, which have large operations elsewhere in Europe and Latin America.
“The fact that the extraordinary tax imposed on Spanish energy companies has pushed Cepsa into a . . . the loss in the first quarter illustrates its poor design and disproportionate impact: more than double the impact on our main competitors as a proportion of net income,” said Maarten Wetselaar, the company’s chief executive officer.
The extraordinary taxes for 2023 were calculated on the basis of the 2022 results of the companies.
Renewable energy group Iberdrola, which called the tax “arbitrary and discriminatory”, paid 216 million euros, about 15% of its quarterly earnings. Repsol, Spain’s largest oil group, was hit by a 450 million euro bill, 40% of first-quarter profits.
In banking, Santander’s account was €224m, or 9% of Q1 profits, while BBVA’s €225m was 12%.
The proportion was much higher in Sabadell, which owns the British bank TSB but has most of its assets in Spain. Its extraordinary tax bill for 2023 was 157 million euros, or 77% of its first-quarter profit.
The Spanish tax, which went into effect in January at the start of an election year, is a signature part of Prime Minister Pedro Sánchez’s response to the cost-of-living crisis.
The government, which insists that companies must do more for society, argues that banks are making “tremendous” profits from rising interest rates and that energy groups have enjoyed excessive gains from high oil prices. gas and electricity since the Russian invasion of Ukraine.
It is using tax revenues to fund measures to ease the impact of inflation, including subsidies for fuel and public transportation. The finance ministry said in February it was on track to raise €3bn this year, in line with its estimates, which would help “prevent the middle and working classes from bearing the full brunt of the crisis”.
Gonzalo Gortázar, chief executive officer of CaixaBank, said last year that the tax was “counterproductive because in an economic slowdown we need a strong banking sector.”
Most of the affected companies have already appealed the tax to the Spanish National High Court and directly challenged it to the Spanish Revenue Agency after making their first payments.
For the largest Spanish banks, the tax is a 4.8% tax on their interest and fee income, payable in 2023 and 2024. The large energy companies must pay a 1.2% tax on their revenues.
Ignacio Galán, president of Iberdrola, said it was wrong to target electricity generators and not just gas companies and complained his formula meant companies would have to pay even if they were losing money.
Ana Botín, executive president of Santander, said that any tax increase “should be the same for all companies”. You also said that the increase in profits is a sign of a return to normal business conditions for the banks.
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