MADRID (Reuters) – Spain’s ruling Socialist party has proposed to extend a temporary windfall tax imposed on banks for three more years, according to a document submitted to parliament seen by Reuters.
It dropped plans for a similar extension on a separate levy imposed on large energy companies.
The proposal put forward on Wednesday is part of a broader fiscal package the Socialist Party negotiated with several smaller parties, including the Basque nationalist PNV and the Catalan separatist Junts.
The windfall tax rate applies to net interest income (NII) and fees charged by local and foreign banks operating in Spain, and would be changed to a range between 1% and 6% instead of the current 4.8%.
The Socialist party’s proposal may still be amended in parliament as the minority government relies on regional parties to pass legislation.
Prime Minister Pedro Sanchez’s Socialist-led government lacks a majority in the lower house and relies on a fragile coalition of smaller parties with conflicting agendas to approve any legislation.
The government’s intention to extend the windfall taxes previously faced strong resistance from Junts that said such a levy would impact investments in parts of Catalonia.
The taxes were originally created to finance measures aimed at easing the cost of living of ordinary Spaniards because of high inflation.
They were put in place in 2022 as extraordinary levies for 2023 and 2024, as banks benefited from higher interest rates and energy firms gained from higher energy prices following the war in Ukraine.
The European Central Bank has reduced its benchmark interest rate in recent monetary meetings and energy prices have returned to levels prior to the war.
Banks, such as Santander and Bankinter, have criticised the extension of the levy.
(Reporting by Jesús Aguado and Emma Pinedo, editing by Inti Landauro and Barbara Lewis)
