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Intermediate evaluation of law 11/2021 against tax fraud

Last December, the Ministry of Finance and Public Function posted on its website the intermediate evaluation of the effects of Law 11/2021, on measures to prevent and combat tax fraud, which had come into force, with general, on July 11, 2021. This evaluation responds to the fulfillment of milestone 377 of the first reform of component 27 of the Recovery, Transformation and Resilience Plan (PRTR). Spain's international commitment, with regard to component 27, the fight against tax fraud, not only consisted of approving a law against tax fraud, law 11/2021, but also in carrying out two evaluations, one intermediate in the last quarter of 2022, and a definitive one, committed for the end of 2023.

To prepare the evaluation report, contributions were received from the Large Business Forum, the General Council of Colleges of Administrative Managers of Spain and the Spanish Association of Tax Advisors (AEDAF). On the other hand, the Taxes and Competitiveness Foundation (FIyC) and the FIDE Foundation created working groups, whose reports were taken into account and cited in the mid-term evaluation. These groups have continued their work to collaborate in the final evaluation of law 11/2021. The Secretary of State for Finance and the Tax Agency appreciate the collaboration of all these entities and the work of the professionals in carrying out the evaluation.

In the mid-term evaluation report, the assessment of the 22 main reform measures incorporated into Law 11/2021 was carried out. On the one hand, the five measures that were expressly mentioned in the CID (Council Implementing Decision, or Council Implementing Decision). These measures are the following:

  1. Limitation of cash payments for certain economic operations, facilitating the traceability of operations and making fraudulent behavior more difficult.
  2. The expansion of the subjective and objective scope of the regime of the list of debtors to the Public Treasury.
  3. The prohibition of dual-use software.
  4. The expansion of the concept of tax haven based on the criteria of transparency, zero taxation and harmful preferential tax regimes; that is, the new concept of non-cooperative jurisdiction.
  5. The incorporation of the reference value as the new tax base for property taxes.

Given the short time that has passed, it is not always possible to have sufficient data and experience to assess the effects of the corresponding measures. On the other hand, not all the regulatory developments of Law 11/2021 could be carried out. Here it is worth noting that with the approval of Order HFP/115/2023, the list of non-cooperative jurisdictions was detailed, which represents the first express update of the Spanish list of tax havens since its establishment in 1991.

It is very relevant, in terms of assessing not only the measure of limitation of cash payments, but also the improvement in the fight against fraud, to refer to the statistical data of the Bank of Spain. These data reflect the continued increase in credit card payments, while, at the same time, cash withdrawals at ATMs decrease.

In relation to the five measures included in the CID , and in general, not only with the others, but also with the work of the Tax Administration, and the improvement of the tax awareness of citizens, it is interesting to evaluate the reduction of tax fraud by comparing tax magnitudes with certain macroeconomic variables . This is the approach that is also included in the 2020-2023 Strategic Plan of the Tax Agency. The most relevant conclusion is that the aggregate tax base of the main taxes has grown more than nominal domestic demand. The most important boost took place in 2021, the year of approval of the anti-fraud law, and in the evaluation report corresponding to that year, the difference was already at 4.7 points.

In addition to the five measures mentioned, the mid-term evaluation analyzes another 17 measures, some referring to specific taxes, such as the exit tax (or exit tax) that applies to Personal Income Tax , or the new regulation of the SICAV that applies to Corporate Tax.

There are also measures that refer to the application of any tax from the tax system, such as the new regime of surcharges for late voluntary payments, or the cases of non-application of surcharges, replaced by late payment interest. These measures, which encourage and facilitate voluntary compliance, even if late, by the taxpayer, have been valued very positively by external reports and contributions to the Tax Administration.

There are also measures that give powers to the Tax Administration, such as new cases of liability or the possibility of adopting precautionary measures in the suspension procedure. Here it is expressly recognized that these measures are considered necessary to avoid pathological cases, but that it is advisable to reinforce the motivation and proportionality in their adoption, as well as expedite the resolution of claims against them, allocating means for this purpose, which which is already being done.

Those interested are recommended to read this mid-term evaluation in full and, of course, in a few months, the final evaluation, which will also include the reform proposals to improve the prevention and fight against fraud, and to facilitate compliance with taxpayers' tax obligations.