Spain's Council of State Accuses Tax Ministry of Bypassing Parliament

Spain's Council of State Accuses Tax Ministry of Bypassing Parliament

The highest state advisory body has rebuked the Ministry of Finance (Ministerio de Hacienda) for assuming powers it does not hold. In its opinion on the processing of a tax regulation, the Council of State accuses the Tax Agency (Agencia Tributaria) of generating "legal uncertainty" through poor legislation, mixing unrelated topics, restricting citizen participation, and self-imposing unjustified urgency. The key word in the opinion is legislation. And legislating, in a rule-of-law state, is the domain of the Cortes Generales (Spanish Parliament).

The opinion adds that the Ministry modifies sections of the Regulations affecting essential elements of the tax without passing through Parliament. That is, according to the advisory body, the Ministry attributes itself legislative power reserved by the Constitution to the Chamber. The debate peine thereafter goes far beyond a formal defect: it touches the very design of the Tax Agency, its internal incentives, and how it treats taxpayers.

What exactly does the Council of State's opinion say?

The opinion points out several procedural flaws. First, the mixing of disparate subjects in the same norm. Second, the restriction of citizen participation during processing. Third, a declaration of urgency that the Council considers unjustified and which, according to its analysis, leads to errors. And fourth, the most serious point: modifying sections of the Regulations that touch essential elements of the tax without passing through the Cortes.

The accusation is not minor. The Council of State is the Government's highest advisory body and its opinions are non-binding, but when it speaks of "legal uncertainty," it describes a problem affecting anyone who must deal with the tax administration. Legal certainty is not an ornament: it is what allows one to know beforehand which rule applies and with what consequences.

The perverse incentive: bonus for collecting more

Parallel to the opinion, data circulated stating that the Ministry agreed on a €125 million bonus for its staff in exchange for collecting more Personal Income Tax (IRPF) and VAT (IVA). The plan, to which all civil servants can join, is fully paid if €14,675 million is collected in 2025. The logic of the incentive is clear: the Tax Agency rewards collection results, not procedural quality.

The underlying problem is that a system that pays for collection tends to measure success in euros collected, not rights respected. Those working at the Agency know this. An AEAT official expressed it bluntly: the agency's operating methods with companies seem "savage and improper," adding that blocking accounts of those under investigation paralyzes their entire economic activity before any conviction exists.

The case that portrays the system: the debtors' list

On December 23, 2015, the Ministry of Finance published its first list of debtors. At number one appeared a complete unknown: Agapito García Sánchez. His case has become the thread of a documentary, Proven Facts, which describes him as a modern version of the protagonist of Kafka's The Trial: a citizen facing the state machinery and its administration.

The story serves to illustrate something the Council of State's opinion points out more technically. When procedure degrades, the citizen has no way to defend themselves. The debtors' list is published, the name is fixed, and the presumption of innocence operates, in practice, as a formality.

Bureaucracy as a national industry

Spain publishes 900 laws and 960,000 pages of regulation per year, according to data circulating in the discussion. Between 1970 and 2016, 41,336 state norms were approved, at an average rate of 900 laws annually. The State and autonomous communities approved 681 new norms and 895,820 pages of regulation in 2016 alone.

This normative hypertrophy has a direct consequence: the legal uncertainty denounced by the Council of State is not an accident, it is the predictable result of a system that produces legislation in chain. The comparison made in the debate is revealing: in Spain, public officials train in Law; in China, in engineering. The result is that one country produces industrial products and the other produces legislation.

The institutional response: letters and organized defense

Against this panorama, responses begin to organize. Mention has been made of the circulation of letters signed by a Doctor of Law who, according to those trinc the matter, influences the courts examining future tax inspectors. It is also pointed out that finally someone is preparing a structured defense against what is considered administrative action outside the law.

The unanswered question is whether that defense will arrive in time. The Council of State's opinion is non-binding. The collection bonus remains in place. And meanwhile, some maintain that the taxpayer receiving a notice knows that if they pay, the Tax Agency declares them a fiscal incivil. There the analysis stalls: in a system where procedure has become the punishment.