Solidarity Tax in Spain: Multimillionaires Under Pressure

Martin Varsavsky is among the more than 12,000 multimillionaires in Spain who were surprised by a “solidarity tax” at the end of 2022. The socialist government under Pedro Sánchez introduced this temporary levy, which amounts to 1.7% of net worth for assets over 3 million euros and up to 3.5% for assets exceeding 10 million euros. The Argentine-born entrepreneur Varsavsky, founder of five billion-dollar companies, was faced with a significant tax bill. He feels deceived and has since considered leaving Madrid. He finds it particularly unfair that his income is primarily generated in the United States, while Spain reaps the tax benefits. Several multimillionaires have already left the country. The new tax contributed only 632 million euros to state revenues in 2022, affecting merely 0.1% of all taxpayers in Spain. Despite the modest yields, there are calls in the United Kingdom to adopt a similar model. The Tax Justice Network estimates that the UK could collect up to 24 billion pounds annually. Influential voices like Sharon Graham, chairperson of the Unite union, are pushing for the introduction of a wealth tax and a windfall gains tax. On a global scale, the idea of a minimum tax for the world's richest 3,000 billionaires is being discussed, initiated by tax expert Gabriel Zucman. However, the tax faces significant opposition. Esther Villa, a lawyer at Osborne Clarke in Barcelona, sees a deterrent effect on Spain’s entrepreneurs. Many feel penalized for their success. She also points out that the actual revenue fell short of expectations. In 2022, Spain raised a total of 1.9 billion euros through various levies, including the existing wealth tax. Nevertheless, the introduction of a wealth tax deters other countries. Over the past decades, only a few countries like Norway, Spain, and Switzerland have maintained such taxes. While Emmanuel Macron abolished the wealth tax in France over five years ago, other countries struggle with the administrative complexity and low yields of such taxes. Experts like Chris Sanger from EY emphasize that the administrative costs of a wealth tax are significant. Although there has not yet been a mass exodus of multimillionaires from Spain, Varsavsky is contemplating a permanent departure if the tax continues. He hopes for a change in government that will abolish the tax. The impact on older wealthy individuals is particularly devastating, as they no longer have the ability to generate new income in their advanced age.