Spain to slap temporary taxes on banks, power companies, PM says
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Spain will hit power companies and banks with temporary taxes that should rake in 7 billion euros ($7.02 billion) in 2023-2024 to help Spaniards cope with soaring inflation, the government said on Tuesday, triggering a selloff in some banking shares.
Sabadell fell as much as 12%, while Bankinter, and Caixabank were down around 10% following the announcement, dragging down the Spanish IBEX 35 bluechip index
Prime Minister Pedro Sanchez told parliament in a state of the nation speech that annual revenue in 2023 and 2024 from a tax on extraordinary profits of power utilities made this year and next should reach 2 billion euros, while the surprise tax on financial institutions would bring in 1.5 billion euros a year.
Sanchez said the government would impose the tax on “big banks as they were already starting to benefit from (expected) interest rate rises”.
But analysts said banks were already under pressure from recession fears and the possibility that any rate hikes might not be as significant as expected.
“The impact on Spanish banks has been immediate because this measure was not expected and it has come as a cold shower,” said Nuria Alvarez, an analyst at Madrid-based brokerage Renta 4.
The levy would put further pressure on lenders’ ability to generate profits at a time when their provisions are also likely to rise, she said, adding that banks with largely domestic operations were more affected than those with more diversified businesses.
Sanchez said inflation, caused to a large extent by Russia’s invasion of Ukraine, was the biggest challenge for Spain, likening it to “a serious illness of our economy that impoverishes everyone, especially the most vulnerable groups”.
Sanchez also announced 100 euros a month in complementary scholarships for students older than 16 years who already receive scholarships, and free multiple-trip tickets for suburban and medium-distance trains between September and end- December.
He also gave the green light to a major real state development plan which plans to build 12,000 housing units in Madrid.
