30 sep 2016
Corporate tax

CEOE thinks the increase on CIT payments on account is disproportionate

It agrees with the fiscal consolidation efforts, but regrets that they fall onto business activity rather than on cost reduction, in particular non-productive expenditures.

 

CEOE considers disproportionate and excessive the decision adopted today by the Council of Ministers, where they agreed to establish a minimum rate of 23% (25% for banks and oil companies) on CIT payments on account for those companies with a turnover above €10 million with the aim of increasing tax revenues by around €8 billion.

CEOE thinks the increase on CIT payments on account is disproportionate

For entrepreneurs, ensuring compliance with the deficit targets is a priority but said compliance must not be achieved solely by increasing tax revenues but by reducing spending, especially non-productive expenditures. Companies must pay, between October 20 and December 20, a figure that could amount to €24 billion (€21 billion according to the information provided at the press conference subsequent to the Council of Ministers). Most of it within a 20-day period. 

In practice, it means that companies will finance the State at a zero rate, bearing the brunt of the efforts to reduce the deficit. The money advanced by companies will not, therefore, be used for investment, with the consequent impact on job creation. Especially if we consider the announcement made at the press conference following the Council of Ministers, whereby the measure will be in place indefinitely until the target deficit target has been reached.

In addition, it could imply short-term solvency problems in those cases in which there is a revision of the credit rating with the corresponding higher borrowing costs. It also affects competitiveness as we shouldn’t forget that Spanish companies compete with rivals located in other jurisdictions that, by not being affected by such measures, have more liquidity to make investments and research projects, as well as access to cheaper funding.