It may happen that you have heard this word in the media, related to the autonomous communities, Europe or even the whole world. Or it may be that you've never heard of tax dumping before.
If now, either because you want to know what we mean, or because you need to know what are the reasons why the media talk about tax dumping, If you want to clarify this concept, here we have prepared a guide to solve all the doubts that may arise.
What is dumping
Before talking specifically about tax dumping, you should know what the word dumping means, since it comes from English but has a Spanish translation. Dumping is known as selling at a loss or unfair competition. It means that a company, or a business, sells below the normal price, or even at prices below cost, because its objective is to eliminate the competition and make the market its own.
Under international trade laws, dumping is a "Practice in which a company establishes a lower price for imported goods than for the production costs that the company has from the country to which those goods are exported, taking the local company out of competition."
In other words, we are talking about a way of doing business in a negative way, but according to the World Trade Organization it is not prohibited, although it is reprehensible. Still, although many consider it "discriminatory", others see it as "supply and demand."
What is tax dumping
With the above, you can already get an idea of what tax dumping is. In this case, It is related to companies, and the objective of these is to save as much as possible in the payment of taxes. That is the reason why many settle in one autonomous community or another.
For this reason, many Autonomous Communities strive to offer companies the best place, that is, where they have to pay less. In other words, they adjust taxes to the minimum possible in order to offer more benefits to the companies themselves.
Taxes Affected by Tax Dumping
Let's talk about taxes now. As we have said before, tax dumping is directly focused on taxes. Each Autonomous Community has powers to impose different taxes, not only those that affect companies, but also people. For example, the case of the Basque Country or Navarra, which have special "agreements", Madrid, Andalusia ... Each one imposes the taxes that it wants and that affects whether or not to create a company in this place.
But, what taxes are those that can be lowered or raised to do fiscal dumping? Those are the following:
Property tax
It is known as the tax on large fortunes. And, if you have more than 2 million euros, you already have to pay it. In the case of small companies, there is no problem, but when the company is large and has well over those millions of euros, paying this tax does not like anything, so they go to places where they do not have to pay it, or pay much less than elsewhere.
Successions and donations
This is another of the taxes that affect, and several communities in Spain are at war with it because many have decided to eliminate it. And of course, that is beneficial for inheritances, since they do not have to pay anything (that's why many change their residence when the time comes).
In the case of companies, it is the same, because it is a way that the heirs do not have to pay anything when they inherit something (which is always appreciated). There are still communities in Spain that have it, some at a minimal cost, others high.
Environmental taxes
We now turn to the environmental goods tax. This is exclusive to companies and according to the autonomous communities, some are more permissive than others for locate certain industries or companies that may be more or less polluting. Also in terms of requirements.
For this reason, companies are located where, fiscally, it is most convenient for them.
Tax on mechanical traction vehicles
In many municipalities (because they also collect it), in order to have more resources in the area, they tempt companies with a very small price, or even with discounts when they have many vehicles in the company, making it more profitable place it in that location than in another.
Property and real estate tax
Lastly, you have the property and real estate tax. This is collected by the municipalities but, depending on where you are located, you will have more or less benefits. And we are not talking about a small reduction, but about big differences according to municipalities.
Their defense is that they somehow encourage companies to want to locate in their territory, but Using tax dumping is seen, by many, as unfair competition between communities in Spain.
In short, we can speak of the communities themselves offering themselves and companies looking for the "highest bidder" to make a profit from the start of their activity.
Does tax dumping only occur in Spain?
Unfortunately, This practice of tax dumping is not used only in Spain, in fact, in the European Union there are also many countries that offer advantageous tax treatment to large companies, which is why many migrate to these countries instead of staying where they are.
To give you an idea, Apple's headquarters in Europe is in Ireland, and it is not because of having chosen those lands, but because they offer very succulent taxes, with a real effective rate of 0,005% (something that in other countries it's completely impossible).
You also have to keep in mind that large companies can bring big benefits to cities, not only in terms of labor, but also in other sectors that may be interested and are directly or indirectly related to it. In such a way that it helps the economy of that place (which is why they seek to make things as easy (and cheap) as possible for that company).