Ben Pawlowski
A LEADING judge on Spain’s top court has condemned the conduct of the Spanish tax agency in a vote of confidence for dozens of expats who have accused the authority of systematically targeting wealthy foreigners.
José Antonio Montero, a member of the General Council of the Judiciary (CGPJ) and a judge in the Administrative Litigation Division of Spain’s Supreme Court, described a British law firm’s legal challenge over alleged misapplication of the so-called Beckham Law as ‘justified’.
The experienced judge, who has sat on Spain’s highest court since 2009, made the comment following his speech at the First Congress of Tax Law of the Illustrious College of Lawyers of Madrid (ICAM).
During his lecture to the Congress, Mr Montero warned that fiscal sanctions were being used as a ‘pressure mechanism’ instead of an ‘exceptional resource’, meaning that taxpayers were being treated as ‘adversaries’.
The Spanish tax authority, the Congress claimed, causes ‘the taxpayer, aware of the risk of sanction, to be forced to surrender the proceedings even if they have solid legal arguments, which violates the principle of equality of arms’.
These comments regarding the behaviour of Spain’s revenue agency – known as the Hacienda – appear to concord with the findings of a damning white paper published in Madrid last week.
Hacienda vs. the People: an initial report on Spain and the Beckham Law was released last Tuesday by Amsterdam & Partners, a top international law firm who have launched a scathing campaign against the revenue service entitled ‘Spanish Tax Pickpockets’.
The hundred-plus-page report, unveiled at a press conference in the Spanish capital, accuses the Hacienda of ‘systemic, grievous and ongoing violations of the rule of law’ in relation to application of the Beckham Law.
Named after footballer David Beckham following his move to Real Madrid in 2003, the tax break helped to encourage tens of thousands of successful foreigners to relocate to Spain.
Under the legislation, introduced in 2005 by the socialist government of José Luis Rodríguez Zapatero, qualifying foreign workers pay a flat 24.75% tax rate on Spanish income up to €600,000 – significantly lower than the progressive rates of up to 47% paid by Spanish nationals.
However, drawing on the testimonies of over one hundred expats, the report claims that many wealthy foreigners have had their tax status unexpectedly reassessed after years of living in the country.
According to the investigation, victims are subject to ‘unfair audits, investigations, and onerous financial claims made […] without foundation’.
The unforeseen demands are typically accompanied by substantial penalties with victims pressured to pay immediately or accept settlements.
The white paper calls for a sweeping range of reforms to prevent behaviour that is allegedly ‘completely inconsistent’ with European Union and international law, including a new, fully independent review of the practices of the Hacienda.
READ MORE: Beckham Law in Spain: The 5 Eligibilty Pathways for Foreign Workers
Speaking exclusively to the Olive Press, Robert Amsterdam, founding partner of Amsterdam & Partners and co-author of the white paper, said: “They have to reinstate the presumption of innocence, they have to retrain their auditors, and they need to get rid of administrative tribunals that aren’t functioning as courts, but are delaying people’s ability to appeal by years.”
Central to the issue is the use of a ‘perverse’ new €125 million incentive scheme introduced for revenue staff last month, described by the white paper as a ‘slap in the face of every taxpayer in Spain’.
Under the scheme, auditors receive bonuses for collecting more income tax and VAT, which critics claim gives staff a financial incentive to invent cases and engage in ‘organised, malicious, and hostile actions’ against wealthy residents.
The white paper estimates that over €2.1 billion has been offered to staff in bonuses over the past decade.
“The incentive scheme has to be modified or ended immediately,” said Mr Amsterdam. He added: “The white paper expresses what the Spanish people have long suffered: repression at the hands of a government agency operating outside legal limits.”
