The Great Spanish Corporate Tax Dodge

Gerardo Díaz Ferrán is going to need to stump up 30 million euros bail in order to avoid going to jail. This massive requirement is far from untypical. Whether it is a realistic sum is not for me to say, but there is a touch of the theatre about the spectacular demand. Judges, prosecutors and headline writers all revel in the vastness of such demands, just as they do when inflated prison terms are requested.

The play involving Díaz Ferrán is about to begin. Corrupt politicians having exited stage left temporarily are to be replaced by a whole new set of actors - the corporate swindlers. Politicians have lined their pockets and incurred the wrath of a nation that believes, simplistically, that had they not, all Spain's woes would never have occurred. It would be handy to have some of the stolen swag back, but the theatrical production that is Spain's missing millions or billions is shifting its scenery. The corporate world is now facing the spotlight and the scrutiny of an audience wondering what the make-up actually hides.

Díaz Ferrán is accused of money laundering and concealing assets. Both are crimes. The plot is therefore transparent, as transparent as such crimes, the movement of cash and paper trails can in fact be. There is, though, a sub-plot, a less transparent one, and one that isn't illegal but creative. To give it the name that the Hacienda uses, it is "fiscal engineering". The payment of tax. Or not.

The furore in the UK surrounding Starbucks and its tax obligations is being echoed in Spain, and the echo is about to grow louder. The alleged criminality involving Marsans turns the focus onto big business and its failure to contribute to Spanish financial well-being. The publicity afforded to political corruption has tended to obscure the often far greater sums of money that have not been forthcoming from multinationals and Spanish companies.

Here is an interesting fact. In 2007, BC (before crisis), Spanish companies achieved record profits, there having been an overall increase of 15%. The government anticipated that its coffers would therefore swell at least to the same extent as they had thanks to taxes raised in 2006. Strangely enough, they didn't. In fact, they under-swelled; company tax revenue fell by 18%. The only plausible explanation was that tax evasion had increased. It continues to increase, and mostly all of this tax evasion centres on super rich private individuals and on large businesses and multinationals. 

Here is another interesting fact (well, estimate): 80% of Spanish companies are said to be hiding money in tax havens. And here is yet another interesting fact. Between them, seven of the world's largest businesses, all with Spanish divisions, have managed to pay only 25 million euros tax in the last three years, despite having registered billions of euros in revenues.

If you want to know which companies these are, I'll happily tell you, thanks to the revelation made by the "El País" journalist, Jesús Sérvulo González. Or rather, let me give you some clues first.

Are you buying books or other goods online and sending them as Christmas presents? What sort of a computer do you have (those with the two main operating systems)? Do you buy goods via an online auction? Do you spend all day communicating total drivel to your friends? Do you attempt to blow up the internet by typing a word you shouldn't into something you shouldn't (or into a different something)?

Yep, Amazon, Apple, Microsoft, eBay, Facebook, Google and Yahoo. 25 million euros over three years between the seven of them. And how do they manage to pay so little? Take Apple, for example. Most of its sales are billed not in Spain but in Ireland where corporation tax is almost a third of the rate in Spain. The tax bill for its retail wing in Spain last year was under 150,000 euros on a turnover of more than 75 million. Most of its costs were allocated to the Irish subsidiary.

Not all multinationals contribute as little. Surprisingly perhaps, given the lack of tax revenue that the UK gains from Vodafone, the mobile phone company's Spanish division handed over almost 900 million euros between 2008 and 2010. Like the other technology giants, there is nothing wrong with how Vodafone accounts for tax in different countries (though the Spanish tax man has taken a particular interest in both Google and Microsoft), but there is the moral issue, one that is that much greater when ordinary people in Spain are being hammered by tax rises.

There again, in the corporate world, there is morality and there is morality, a conundrum that Sr. Díaz Ferrán may care to reflect on.


Any comments to andrew@thealcudiaguide.com please.