In three decades of international experience, Christopher Wales – British Fiscal Assessor who worked for prime ministers Tony Blair and Gordon Brown – says he has not witnessed a state pressure mechanism as uncontrolled as the one to have a hacienda in Spain. Co -author of the White Paper «Finance against the people» presented in May by the Morkte Amsterdam & Partners, Wales describes a strategy of harassment and violations of rights that reaches both national taxpayers and foreigners, the latter trapped in the Beckham Law. In the center of the controversy, a system of millionaire bonuses to inspectors, which rewards collection and feeds the coercion and use of the concept of “simulation”, capable of canceling legitimate operations. A gear that, they warn, constitutes a systematic and deliberate violation of human rights.
Why is the Spanish impatriated regime or Beckham law a human rights issue in Spain?
The Spanish regime of impatriated historically has not been focused on any particular sector. Basically, he said that if you were a foreigner, or even a Spaniard who returned, and came to work, you met some basic requirements and then you could benefit from a reduced IRPF flat rate, and the income or heritage you had outside of Spain was not taxed. Some economists have criticized that this regime is too broad and is not focused on sectors where Spain needs talent.
More recently, at the end of 2023, changes were introduced by 2024 in order to attract the so -called “digital nomads” under the Beckham law. This is a more directed approach, but, as always in Spain, you have to go through 27 different obstacles and paperwork to demonstrate that you are the right type of person which, I suspect, dissuade many people to come.
Why is this a human rights issue in Spain? Well, frankly, the entire application of the fiscal system in Spain is a human rights problem. Before starting to investigate the Spanish fiscal system, I also made the mistake that many people make: I assumed that Spain, as an EU member, operated its fiscal system on a regular basis, following normal norms and procedures. But it has been a surprise for me to discover how different it is. I have worked in dozens of countries in the last 20-30 years, even in difficult places such as Uganda, Tanzania or Rwanda, where human rights are not especially strong and there are also fiscal problems.
I talked to a friend of mine who was until recently head of fiscal policy at Uganda’s Ministry of Finance. He is now a financial services commissioner. This morning we exchanged messages for WhatsApp and literally told me “I have always suspected the behavior of the Spanish tax system. Fiscal authorities have too much discretionary power. If it is not controlled, the possibility of abuse is very high. It is very serious. I would expect that, being a member of the EU, they were subject to some code of conduct on fiscal ethics. How did they become an almost terrorist organization? ” And this is said by someone who held the highest fiscal position in Uganda.
This is a human rights problem because, frankly, the functioning of the fiscal system in Spain is out of control. Taxpayers are subject to tremendous pressure to pay taxes that often should not legally, but they are so afraid of the power of the Treasury that they pay and then hide waiting for anything worse.
Amsterdam & Partners speaks of persecution and lost lives. But Hacienda argues that in the last decade only 0.05% of the 337,000 beneficiaries of the Beckham Law have been investigated, and of the inspections carried out, 70% ended with agreement or acceptance. What do you think of these figures?
First, Hacienda launches these numbers without ever providing evidence. That 0.05% have repeated it many times. These numbers cannot be true. If I really were 0.05%, I would have to believe that we have talked to all of them, and it is not clear. So first, they present evidence instead of absurd figures. Regarding 70% who accepted agreements, Robert Amsterdam has already given his opinion, and I share it. If someone points to you with a gun at the head, you say “ok, payment.” That is essentially what Hacienda does. They offer an agreement, sometimes with amount reduction and especially with lower sanctions, which are scandalous, 50%, 125%or up to 150%. But taxpayers know that if they fight, the Treasury can make a life a hell for years, justice is slow in fiscal cases, you have to pay in advance to resort, there are seizures of goods, reputational damage …. so it is understandable that many people pay even if they owe nothing. It is a scandalous situation. I don’t know any other place in the world where people feel so intimidated to pay what should not.
Why is it so difficult to open a public debate on the rights of the taxpayer and the abuse of power of the Treasury?
At first it was difficult to find people willing to speak publicly of the subject. As non -resident foreigners, we have the privilege of not being able to be audited by the Treasury, we have no properties or business in Spain, so they find it difficult to intimidate how they do with others.
We believe that we are now reaching a point where it is possible to have a more open debate about the need to reform the Tax Administration in Spain. There is no reason why in a normal democratic environment, if we can think of Spain as such, citizens must be treated in this way. Terrible things are happening. For example, the young farmer who led protests against the Government and ended up committing suicide after a fiscal persecution. There are many cases in which it seems that a fiscal inspection was used as retaliation for opposing the government. It is outrageous. My friend in Uganda said it clearly: “It is incredible that such a blackmail level exists without control.”
In a situation where there is more public debate on the issues it is possible to advance to the next step, which consists in identifying not only the areas where reforms are needed, but also the specific types of reform, the measures that are required .. Here it is clear that it is much to do in the administration, and that is the most urgent.
Why do you consider that the bonuses system for fiscal inspectors in Spain is illegal or even contrary to European and international law?
Spain has a quite different bonuses system from almost any other country in the world for tax inspectors. In my experience, it is unique. We have conducted a team study on the rights of taxpayers in 21 countries, the majority members of the OECD, and we have not found in those 21 countries a bonus system similar to that operating in Spain. The general director of the Tax Agency states that three quarters of the OECD countries have some type of efficiency, productivity and similar bonus system. They have it. But the Spanish system is not similar. They do not focus on collection, but on the efficiency of processes.
In 2022, when the Association of Fiscal Advisors of Spain raised numerous questions about the bonuses system for the personnel of the Tax Agency, they were informed that the bonuses for productivity were 1.4% of the remuneration. Since then, the Tax Agency has implemented annual bonuses systems of different types, scopes and amounts, including this year. However, every time you ask for bonuses, it is always 1.4% of the salary.
If you do the calculations, as we did approximately a month ago, the bonuses plan for 2025 is 125 million euros. There are about 25,000 employees of the Tax Agency. If everyone received the same amount, they would charge 5,000 euros totally linked to the collection. If that represents 1.4% of its remuneration, according to my calculations, it means that the average salary in the Tax Agency is 357,000 euros. Well, I don’t think they are really paid. It is a complete nonsense, the truth. And they should be ashamed. They only go out with them because they have political coverage. The bonuses system is largely behind this problem. If there is a system that encourages agents to behave in a certain way to get more money, that is what they will do.
How does the use of the concept of “simulation” by the Treasury are misrepresented to punish the taxpayer without legal basis?
Simulation is an ideal weapon for a farm inspector. The better your company’s documentation, the more likely they say it is a perfect simulation, it is a perfect fraud. They are told that, for fiscal purposes, their business does not exist and that everything has to be taxed with the threat of imposing fines of 125%. If you conform to avoid major judgments and fines you are admitting guilt.
The courts are rigged against you because the legislation, the General Tax Law, says that the presumptions of the inspectors who direct a personal business and not a legitimate company must be believed unless you have overwhelming evidence otherwise. And we all know that in Spain, especially in the lower courts, which are not independent, it is almost impossible to demonstrate that your business is legitimate. The burden of evidence has moved from the Tax Agency, which should normally demonstrate that your business was a farce. So who has to demonstrate that it is not the individual. And that is one of the most significant human rights abuses.
Of course there are people who create fictitious companies, and most governments have some type of fiscal antiver legislation that could apply in those extreme cases. But in Spain it is a usual resource as an argument against the taxpayer.
Taking all this into account, what are the pillars of Amsterdam & Partners’s legal strategy against the Treasury?
We will use all possible means to press governments to change. It is clear that what is being done violates many of the fundamental rights enshrined in the EU. There are issues that must be addressed in Spain itself, through Spanish courts, but also through the UN and Roberts Amsterdam has written to the OECD expressing its deep concern for various practices of the Spanish Tax Agency. There are many forums in which we can present our arguments, including several courts in Spain and outside of Spain. And we will do it. But, being honest, the most important thing is not to try to gain litigation. The most important thing for Spanish citizens is to get a change. Yes, there are also foreigners who suffer but, frankly, all in Spain live in fear of the Tax Agency.
We will expand our White Paper. We will analyze the situation in other countries in a comparative way and then establish the legislative and other measures that must be adopted. The intention is to promote a very substantial reform in areas of the Spanish Tax Administration where things are going very badly.
Do you think this international pressure can really force the Spanish government to carry out a tax reform?
That is the objective of what we are doing. The government will finally realize that it is not worth doing what it is doing now. Because they will simply run out of room. People from outside Spain, important people, investors, international organizations of one type or another, will realize that business cannot be done with the Spanish government safely as they continue to behave like that. The solution is in their hands, and only in them. If the government does not act, then, in my opinion, politically speaking, it is probably inept.