The following interview is a translation from Spanish newspaper La Razón:
Interview with the British tax adviser, co-author of Hacienda contra el Pueblo. The former tax adviser to Tony Blair and Gordon Brown denounces rights violations by the Tax Agency, accuses the body of concealing data, and claims that the judiciary is rigged.
In three decades of international experience, Christopher Wales – British tax adviser who worked for Prime Ministers Tony Blair and Gordon Brown – says he has never witnessed a state pressure mechanism as uncontrolled as that deployed by the Tax Agency in Spain. Co-author of the white paper Hacienda contra el Pueblo, presented in May by the firm Amsterdam & Partners, Wales describes a strategy of harassment and rights violations that affects both national and foreign taxpayers, the latter caught up in the Beckham Law.
At the centre of the controversy is a system of multimillion-euro bonuses for inspectors, which rewards collection and fuels coercion and the use of the concept of “simulation,” capable of nullifying legitimate transactions. A mechanism which, they warn, constitutes a systematic and deliberate violation of human rights.
Why is the Spanish regime for inbound expatriates, or Beckham Law, a human rights issue in Spain?
The Spanish inbound expatriate regime has historically not been focused on any particular sector. It basically said that if you were a foreigner, or even a Spaniard returning, and you came to work, met some basic requirements, then you could benefit from a reduced flat rate of personal income tax, and you were not taxed on the income or assets you had outside Spain. Some economists have criticised this regime as being too broad and not focused on sectors where Spain needs talent.
More recently, at the end of 2023, changes were introduced for 2024 with the aim of attracting so-called “digital nomads” under the Beckham Law. This is a more targeted approach, but, as always in Spain, you have to go through 27 different hurdles and paperwork to prove you are the right kind of person which, I suspect, discourages a lot of people from coming.
Why is this a human rights issue in Spain? Well, frankly, the entire enforcement of the tax system in Spain is a human rights issue. Before starting to investigate the Spanish tax system, I also made the mistake that many people make: I assumed that Spain, as an EU member, operated its tax system in a regular way, following normal rules and procedures. But it has been quite a surprise to me to discover how different it is. I have worked in dozens of countries over the past 20–30 years, including in difficult places like Uganda, Tanzania or Rwanda, where human rights are not particularly strong and there are also tax problems.
I spoke with a friend of mine who until recently was head of tax policy at the Ministry of Finance in Uganda. He is now Commissioner of Financial Services. This morning we exchanged WhatsApp messages and he literally said to me: “I have always suspected the conduct of the Spanish tax system. The tax authorities have too much discretionary power. If it is not controlled, the possibility of abuse is very high. It is very serious. I would expect that, being a member of the EU, they would be subject to some code of conduct on tax ethics. How did they become almost a terrorist organisation?” And this is coming from someone who held the highest tax position in Uganda.
This is a human rights issue because, frankly, the functioning of the tax system in Spain is out of control. Taxpayers are under tremendous pressure to pay taxes that they often do not legally owe, but they are so afraid of the power of the Tax Agency that they pay and then hide, hoping nothing worse will happen to them.
Amsterdam & Partners speaks of persecution and lost lives. But the Tax Agency maintains that in the last decade only 0.05% of the 337,000 beneficiaries of the Beckham Law have been investigated, and of the inspections carried out, 70% ended with agreement or acceptance. What do you think of these figures?
Firstly, the Tax Agency throws out these numbers without ever providing evidence. That 0.05% has been repeated many times. These numbers cannot be true. If it were really only 0.05%, I would have to believe that we have spoken to all of them, and clearly that is not the case. So first, let them present evidence instead of absurd figures. Regarding the 70% who accepted agreements, Robert Amsterdam has already given his opinion, and I share it. If someone points a gun at your head, you say “OK, I’ll pay.” That is essentially what the Tax Agency does. They offer a settlement, sometimes with a reduction in the amount and above all with lower penalties, which are outrageous, 50%, 125% or even 150%. But taxpayers know that if they fight, the Tax Agency can make their life hell for years, the justice system is extremely slow in tax cases, you have to pay in advance to appeal, there are asset seizures, reputational damage… So it is understandable that many people pay even if they owe nothing. It is a scandalous situation. I do not know any other place in the world where people feel so intimidated into paying what they do not owe.
Why is it so difficult to open a public debate on taxpayer rights and the abuse of power by the Tax Agency?
At the beginning it was difficult to find people willing to speak publicly about the issue. As foreign non-residents, we have the privilege of not being able to be audited by the Tax Agency; we have no properties or businesses in Spain, so it is difficult for them to intimidate us as they do with others.
We believe that we are now reaching a point where it is possible to have a more open debate about the need to reform the tax administration in Spain. There is no reason why, in a normal democratic environment—if we can think of Spain as such—citizens should be treated this way. Terrible things are happening. For example, the young farmer who led protests against the Government and ended up committing suicide after a tax prosecution. There are many cases where it seems that a tax inspection was used as retaliation for opposing the Government. It is outrageous. My friend in Uganda put it clearly: “It is incredible that such a level of blackmail exists without control.”
In a situation where there is more public debate on these issues, it is possible to move to the next step, which is to identify not only the areas where reforms are needed, but also the specific types of reform, the measures that are required. Here in Spain it is clear that there is still much to be done in the administration, and that is the most urgent thing.
Why do you consider that the bonus system for tax inspectors in Spain is illegal or even contrary to European and international law?
Spain has a bonus system quite different from that of almost any other country in the world for tax inspectors. In my experience, it is unique. We have carried out a team study on taxpayer rights in 21 countries, most of them OECD members, and we have not found in those 21 countries a bonus system similar to that which operates in Spain. The Director General of the Tax Agency states that three-quarters of OECD countries have some kind of bonus system for efficiency, productivity, and similar. They do. But it bears no resemblance to the Spanish system. They do not focus on revenue collection, but on process efficiency.
In 2022, when the Spanish Association of Tax Advisers asked numerous questions about the bonus system for Tax Agency staff, they were informed in writing that productivity bonuses were 1.4% of remuneration. Since then, the Tax Agency has implemented annual bonus systems of different types, scope, and amounts, including this year’s. However, every time they are asked about bonuses, it is always about the 1.4% of salary.
If you do the maths, as we did about a month ago, the bonus plan for 2025 is €125 million. There are about 25,000 Tax Agency employees. If everyone received the same amount, they would get €5,000 entirely linked to collection. If that amounts to 1.4% of their pay, according to my calculations it means the average salary at the Tax Agency is €357,000.
Well, I do not think they are actually paid that much. It is complete nonsense, honestly. And they should be ashamed. They only get away with it because they have political cover. The bonus system is largely behind this whole problem. If there is a system that encourages agents to behave in a certain way to get more money, that is what they will do.
In what way is the use of the concept of “simulation” by the Tax Agency being distorted to punish the taxpayer without legal basis?
Simulation is an ideal weapon for a Tax Agency inspector. The better your company’s documentation, the more likely they are to say it is a perfect simulation, a perfect fraud. They tell you that, for tax purposes, your business does not exist and that everything must be taxed in your name, with the threat of imposing 125% fines. If you settle to avoid trials and higher fines, you are admitting guilt.
The courts are rigged against you because the legislation, the General Tax Law, says that the inspectors’ presumptions that you are running a personal business and not a legitimate company must be believed unless you have strong proof to the contrary. And we all know that in Spain, especially in the lower courts, which are not independent, it is almost impossible to prove that your business is legitimate. The burden of proof has shifted from the Tax Agency, which would normally have to prove that your business was a sham. So the individual has to prove that it is not. And that is one of the most significant human rights abuses.
Of course there are people who set up fictitious companies, and most governments have some kind of anti-avoidance legislation that they could apply in those extreme cases. But in Spain it is a common resource as an argument against the taxpayer.
Taking all this into account, what are the pillars of Amsterdam & Partners’ legal strategy against the Tax Agency?
We will use all possible means to pressure governments to change. It is clear that what is being done violates many of the fundamental rights enshrined in the EU. There are issues that must be addressed in Spain itself, through the Spanish courts, but also through the UN, and Robert Amsterdam has written to the OECD expressing his deep concern about various practices of the Spanish Tax Agency. There are many forums in which we can present our arguments, including several courts in Spain and outside Spain. And we will do so. But, to be honest, the most important thing is not to try to win lawsuits. The most important thing for Spanish citizens is to achieve change. Yes, there are also foreigners who suffer, but frankly, everyone in Spain lives in fear of the Tax Agency.
We will expand our white paper. We will analyse the situation in other countries comparatively and then establish the legislative and other measures that must be adopted. The intention is to encourage very substantial reform in areas of the Spanish tax administration where things are going very badly.
Do you believe that this international pressure can really force the Spanish Government to carry out tax reform?
That is the goal of what we are doing. The Government will eventually realise that what it is doing now is not worth it. Because they will simply run out of room. People outside Spain—important people, investors, international organisations of one kind or another—will realise that it is not possible to do business safely with the Spanish Government while it continues to behave this way. The solution is in their hands, and only in theirs. If the Government does not act, then, in my opinion, politically speaking, it is probably incompetent.