Week in Insights: Spain’s Property Play Is a Blunt Tax Instrument

Spain recently proposed a 100% tax on properties purchased by non-European Union residents to resolve a housing crunch—the tax policy equivalent to aiming a bazooka at a mosquito. Taxing short-term rental income or levying additional taxes on vacant properties would be better solutions.

Although the proposal seeks to address the housing crisis, the measure unfairly imposes the tax on buyers based on their residence status rather than their intentions for the property.

The policy ignores the key question of whether a property is being used as a vacation home, investment, or residence. Non-EU retirees, seasonal workers, and individuals contributing to the local economy could be penalized, while EU residents purchasing homes for investment or short-term rentals could escape the tax.

The proposal’s focus on residency introduces an arbitrary distinction. There’s little meaningful difference between an EU resident and a non-EU resident purchasing a property for short-term rental purposes. And the Spanish government has more precise tools to boost tax revenue and tackle housing shortages.

Taxing short-term rental income—perhaps specifically from nonresident landlords—would combat one of the primary drivers of unaffordable housing. Additional taxes levied on vacant properties also could encourage owners to rent properties to locals rather than wait out the market. These approaches would focus tax policy on property usage without deterring foreign investments altogether.

Spain’s housing crisis is urgent, but a policy that alienates non-EU buyers risks doing more harm than good. Instead, Spain should adopt targeted, equitable measures that address the causes of housing shortages.

—Andrew Leahey

Welcome to the Week in Insights for Bloomberg Tax’s latest analysis and news commentary. This week, experts analyzed a Tax Court jurisdiction case before the US Supreme Court, Mexico’s plans to implement the International Compliance Assurance Program, and more.

Insights

Texas Law’s Calvin Johnson calls for reducing goal-connected tax benefits, saying that Congress should more strictly define the good they achieve.

Pace University tax professor Phil Cohen says streamlining business income tax laws would ease compliance and help with IRS enforcement.

Baker McKenzie’s Nadja Ruiz Euler and Carlos Linares-Garcia examine Mexico’s step toward adopting the International Compliance Assurance Program, noting that tax administrators could help companies use the program advantageously.

Husch Blackwell’s Robert Romashko argues that a Tax Court jurisdiction case before the US Supreme Court shows the IRS is focused more on procedures than taxpayer service.

Mayer Brown’s James Ferguson examines potential risks with acquiring intellectual property, saying that a post-closing, intra-corporate licensing structure is needed to fully use the IP.

Columnist Corner

Technically Speaking design by Jonathan Hurtarte/Bloomberg Tax

The US Supreme Court should hold that religiously affiliated charities must pay Wisconsin’s unemployment tax if their activities mirror those of secular organizations, Andrew Leahey says in his latest Technically Speaking column.

Ruling otherwise would weaken the tax system’s integrity, distort the marketplace of charities, and open the door for abuse, as “exemptions originally designed to respect genuine religious exercise could devolve into fertile grounds for attempts to avoid taxes,” Andrew argues. Read More

News Roundup

Supreme Court Allows Corporate Transparency Act Enforcement

The US Supreme Court said it will allow the government to implement the Corporate Transparency Act, requiring millions of businesses to file information on their beneficial owners. Read More

Trump Freeze to Chill Regulations on ‘Double-Dipping,’ Book Tax

President Donald Trump’s regulatory freeze stands to affect rules governing “double-dipping” of corporate losses and the corporate book-income tax, among other recent tax rules the new administration is likely to scrutinize. Read More

Unfinished Energy Tax Credits Caught in Trump’s Rulemaking Pause

President Donald Trump’s freezing of all pending agency rules during the first day of his administration also halted the wave of guidance for clean energy tax credits. Read More

US Allies Stay Committed to OECD Tax Deal Despite Trump Threats

Some of the US’ closest allies said they will continue to negotiate the OECD-led global tax reform deal despite its rejection by President Donald Trump, who said that it would harm US companies. Read More

Career Moves

Scott Flynn will become KPMG’s global head of audit on April 1.

Philippe Heeren rejoined Reed Smith as a partner in its global regulatory enforcement group in Brussels.

Aranpreet Randhawa joined Fried, Frank, Harris, Shriver & Jacobson as a partner in its global asset management practice in London.

Patrick O’Gara joined Skadden as partner in its tax group in London.

Julia Landru was promoted to of counsel in Charles Russell Speechly’s private wealth and tax team in Paris.

Cyrus Wagner III and David Molenda were promoted to partners at Mesch.

If you’re changing jobs or being promoted, send your submission to TaxMoves@bloombergindustry.com for consideration.