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.

Hidden Assets: The Marsans scandal

The surviving business partner who ran what was once Spain's largest company employer has been arrested. Gerardo Díaz Ferrán formerly headed up Grupo Marsans along with Gonzalo Pascual, who died six months ago, and was also formerly the president of the CEOE, the Spanish equivalent of the CBI. He was detained on Monday, accused of money laundering and non-declaration of assets.

Díaz Ferrán's arrest is the latest twist in the ongoing investigation of the bankrupted Marsans, and Díaz Ferrán is the latest Spanish über-businessman with a strong Mallorcan connection to be collared by the police. Of others, José María Ruiz-Mateos, owner of another failed company, Nueva Rumasa, is accused of diverting money raised by mortgaging hotels in the Hotasa chain, of which there are several in Mallorca. Nueva Rumasa, in its original incarnation before it was expropriated by the Spanish government in 1983 because of its massive debts, was Spain's biggest company, so in that previous incarnation it was as important a business as Marsans was prior to its collapse in 2010.

Díaz Ferrán and Ruiz-Mateos are both high-profile businesspeople, though arguably neither is as high profile as Iñaki Urdangarin, the King's son-in-law, if only because neither of them has royal connections. Urdangarin is the third party in what is a pretty unholy businessperson trinity, even if the money involved in the case against Urdangarin is small beer when compared with that which is involved with both Marsans and Nueva Rumasa.

One aspect of the case against Urdangarin that has been investigated is the alleged channelling of money offshore. Díaz Ferrán faces a similar investigation, and the timing of his arrest is probably no coincidence as it has followed swiftly on the period of the amnesty for declaring previously undeclared assets having ended.

The investigation of Díaz Ferrán has been prompted in part because of complaints lodged by the likes of the Meliá hotel group and the Orizonia travel company. These complaints extend beyond Díaz Ferrán and include Ángel de Cabo, who has also been arrested. De Cabo is significant in all this, and especially so for Mallorca. Not only has he acquired some Nueva Rumasa businesses, his investment vehicle, Posibilitum, acquired Marsans businesses, one of them being Hotetur, of which Alcúdia's huge Bellevue hotel complex is a part. The complainants refer to the "alleged sale" for 600 million euros of Marsans to Posibilitum just prior to Marsans being declared bankrupt; this purchase has alternatively been described as having been made with a "nominal sum".

De Cabo, according to the police, acted as a sort of front man for Díaz Ferrán, and received a significant sum for doing so. The thrust of charges is that assets were syphoned off and hidden to avoid demands against Marsans that exceeded 400 million euros.

To say that the whole affair is complicated would be an understatement, and it is one that highlights links and relationships at the grandest corporate level which impact on Mallorca and Spain's tourism industry. One such link is that between Marsans and Orizonia. The latter is owed money by Marsans. The guarantee against this money was Bellevue, and the future management of Bellevue has been (and still is, as far as I am aware) the subject of a separate judicial examination to decide the fate of Hotetur. A proposal to split the operation of Bellevue between Posibilitum's management company and Orizonia's Luabay hotel division appears to still be up in the air. It is likely to be even further up in the air now that De Cabo has been arrested, now that questions about Posibilitum's acquisition of Marsans are being asked and now that, to make matters even more complicated, the Barceló hotel group has offered to buy Orizonia, subject to agreement by the Spanish competition commission. The uncertainty that has surrounded Bellevue throughout its 40 years of existence just refuses to go away.

Coming on top of political corruption cases and of the dire economic situation, the cases against the unholy businessperson trinity are all damaging: Ruiz-Mateos, because he has long sailed close to the wind; Urdangarin, because of his connections; and now Díaz Ferrán. Of the three, his case may prove to be the most damaging for what remains of Spain's reputation. Former president of the Spanish business confederation, former owner of a massive company at the heart of the tourism industry; it doesn't get much worse.

Though the Díaz Ferrán case is not exclusively a Mallorcan issue, the affair does have strong Mallorcan links. Political corruption had come to be pretty much expected in Mallorca. Now there is business scandal as well, and you wonder how much more there might be to come.


Any comments to andrew@thealcudiaguide.com please.

The Rumour Mill: Bellevue

Rumours. It was the regularity with which rumours surrounding Bellevue in Alcúdia surface that was one of the reasons why I spoke with the assistant director last year. Rumours are always circulating about Bellevue. Unfortunately, the contact is no longer there, but even were he it is doubtful that I would get far in asking a question about the current rumour that's doing the rounds - that Bellevue will not be open next year.

There have been previous rumours along these lines, and they have all proven to be false. What is fuelling the current one is nothing directly to do with Bellevue or indeed Hotetur, the chain which operates the hotel. It has to do with the financial problems at Grupo Marsans, the ultimate owner of both Hotetur and the hotel complex. I have referred to these problems before, both here and in "Talk Of The North". Marsans faces demands from creditors, one of which is the travel group Orizonia. A guarantee against a debt of some 40 million euros is Bellevue. Orizonia is demanding payment of this debt and the execution of its mortgage on Bellevue.

It is from this, one assumes, that the rumours are stemming. In the reports of the court hearings into Marsans and its difficulties, there has been nothing about Bellevue closing. The rumours would appear, as so often, to be the result of taking facts (and one can't even be sure that facts are being taken) and moulding them into something without any basis in truth. I have asked people about the sources from which they have heard about Bellevue's alleged closure. They go along the lines of someone who spoke to someone in a bar near to the hotel.

Bellevue stands on some 200,000 square metres of prime real estate in Alcúdia. It can, at a stretch, accommodate 6,000 guests. Orizonia, as with many a hotel or travel group, would love to get their hands on it. It has a hotel division that was created in 2008, into which Bellevue might well fit, though if you go to the website - http://www.luabay.com - and read the over-the-top narrative about how they will "seduce" you, you might be forgiven for thinking that Bellevue might not fit after all.

Of course, there is also a question as to quite how well Bellevue (as with many other hotels) is shaping up under the current difficult circumstances. But this is a separate issue. One finds it hard to believe that there is substance to the rumours.


And who knows, maybe a "new" Bellevue might become the destination for the much-longed-for Russian tourist market. President Antich has been in Moscow, wooing tour operators and predicting that Russia will become the third most important foreign market for Mallorca and the Balearics after Germany and the UK. Germans do not go to Bellevue in huge numbers, which is probably as well. You think there might be a bit of British-German antagonism, well according to some of my German sources this is nothing compared to that which exists between the Germans and the Russians. Hey ho, perhaps it's as well that Russia aren't in the World Cup.


Any comments to andrew@thealcudiaguide.com please.