- On 18 February the Council of Ministers approved bills for a tax on certain digital services and a financial transactions tax.
- A bill is only the first step: it must go through Parliament and be published in the Official State Gazette to take effect.
- It pays to read the small print before it becomes law: who the taxpayer is, what the thresholds are and which operations are covered.
On 18 February 2020 the Council of Ministers approved bills for a tax on certain digital services and a financial transactions tax, popularly known as the “Google tax” and the “Tobin tax”. They were two of the tax measures the new government’s programme had announced weeks earlier, and with this approval they moved from intention to legislative process. The parliamentary debate still lay ahead, and with it the possibility that the details would change.
For those who run a company or manage assets, the announcement was not a distant matter. A tax on digital services and another on financial transactions affect, even if indirectly, advertising, platforms, investment and the costs of operating. It was therefore worth understanding where the process stood and what might change along the way.
What a bill is
A bill approved by the Council of Ministers does not mean the tax already exists: it is the first step in the legislative process. The text must go through Parliament, where the groups can table amendments, and it only takes effect once it is published as law in the Official State Gazette. Between one and the other weeks or months may pass, and the final content may differ from the initial one.
Following that path makes it possible to anticipate the final outcome. Amendments can change the scope, the exemptions or the date of application, and a text that looked broad may end up narrower, or the other way round. At this stage, therefore, the sensible course is to get informed and prepare, but without taking irreversible decisions based on a draft that can still change. Following the legislative process with the help of the adviser is part of diligent tax management.
Who pays and who feels it
Although they fall on large groups and stock-market trades, taxes like these are often partly passed on to clients and investors. A tax on digital services can end up in the price of the advertising or platforms companies use, and a financial transactions tax makes trading dearer for those who invest, even in small amounts. When the tax falls on a transaction, each intermediary involved in it may end up passing its share on to the next.
The effect does not depend only on the law, but on how those affected react. Some companies will absorb part of the cost; others will pass it on in their rates, and others will reorganise the way they operate. For a client company, the consequence may be a price rise in a service it depends on, and it is worth checking what price-adjustment clauses its contracts contain.
Reading the small print
Before assuming that a new tax does not apply to you, it is worth checking who the taxpayer is, what the thresholds are and which operations are covered. Definitions matter: what looks like a digital service to a citizen may not be one for tax purposes, and the other way round. A mistake of interpretation can be costly, whether by paying too much or by failing to comply without knowing it.
A word with the tax adviser while the text is still a bill shows whether prices, contracts or ways of operating need adjusting. It is a short conversation that, held in time, avoids hasty decisions and leaves room to prepare the accounts, the invoicing systems and the communication with customers and suppliers. It is also worth identifying who in the company will be responsible for following each regulatory development, so that none gets lost among daily tasks.
The point is to read the small print of each new tax before it becomes law, not afterwards.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
