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Catalan Bank-Deposit Tax Is "Unconstitutional"

Source: Bloomberg - Fri 21st Dec 2012
Catalan Bank-Deposit Tax Is 'Unconstitutional'

Spain's central government will contest Catalonia's decree creating a tax on bank deposits as unconstitutional, increasing tension with the region that plans a referendum on secession.

The Cabinet approved the challenge today, Deputy PM Soraya Saenz de Santamaria told reporters in Madrid after the weekly meeting. She reiterated that the central government may impose a nationwide tax on deposits, without giving details.

Catalonia passed the decree a day before the national parliament moved to prevent regions from imposing their own deposit taxes, and as the ruling party in Barcelona was in coalition talks to form a new administration. The new Catalan government, set to be voted in today with the support of a smaller separatist party, plans to hold a referendum on independence as soon as 2014, which the central government also considers illegal.

The government's challenge is based on the principle that new taxes can't be created by decree and interim governments shouldn't undertake such legislative measures, Saenz said. CiU, the party that was re-elected on Nov. 25 without winning a majority, secured parliamentary support from Catalan Republican Left after pledging new taxes and setting a date for the independence referendum.

Spain's Parliament passed a law yesterday creating a national tax on bank deposits with a rate of zero, according to the text published on the Parliament's website. National taxes take precedent over regional levies, and Saenz said the government is trying to ensure a "single market" across Spain for bank deposits.

The Canary Islands, Andalusia and Extremadura, which started taxing banks for deposits before the central government prepared the new law, will be compensated for lost revenue in line with rules on regional financing, said a spokesman for the Budget Ministry who asked not to be identified in line with ministry policy.

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