Mortgage taxation:
a mirror of what is happening in Spain –
separation of powers

Article in Caja Siete Blog, 13 december 2018

Leopoldo Cólogan


There are two adjectives, spectacular and stimulating, that I would use to sum up Géiser 2018, a day that was centred around entrepreneurship and innovation. At the Auditorio de Tenerife on 8 November 2018, we had the opportunity to think out of the box and listen to the messages (applicable to all environments and sectors, including the legal system) of the speakers representing companies such as IBM, fnac, UBER, DIRSE and ARTS, and a strategic institution such as the Department of Education of the Spanish Embassy in the United Kingdom and Ireland.

One of these messages was “not everything that can be done should be done”. This leads us to think that not only must companies take on technological and social responsibility and data management, but the new generations must also be trained in emotional and artificial intelligence, which are key to managing the most important things, which, as Miguel of Unamuno pointed out, are emotions and empathy for oneself and others.

As a result, the emotional impact that a product or service has on the customer, both externally and internally, must be valued and emotional compensation, which has an exponential effect on other parameters, including economic ones, must be increased in any given business.

This message can also be applied to asserting rights and powers, which, regardless of how much one may possess them, cannot always be exercised conveniently or in a certain way due to the damage, whether moral or not, that may be caused or due to a potentially competing overriding general interest. To be specific, this is responsibility and contributing something of value to the society.

It is indisputable that Spain is a democracy, in the same way that the separation of powers, making them autonomous and independent – which the legislature, executive and judiciary should be, is one of the central pillars of a democracy. Powers should monitor one other to prevent abuses of power.

If you carefully read the grounds for Royal Decree Act 17/2018 of 8 November, which amends the consolidated text of the Act on Property Transfer Tax and Documented Legal Procedures, adopted by Royal Legislative Decree 1/1993 of 24 September, it is possible to see what is happening today in Spain: these three powers certainly exist, but they do not always share the same mentality and some must monitor the excesses of others.

In the case of the cited Royal Decree Act 17/2018, the executive has reached a legislative decision, justifying not relying on the legislature, which must be exceptional and validated or repealed by the latter, due to the urgency with which it must act because the judiciary has caused uncertainty and legal insecurity, affecting the mortgage market as a whole.

“not everything that can be done should be done"

The executive, i.e. the government, attributes this situation to the judiciary due to the fact that the Supreme Court, Chamber of for Contentious Administrative Proceedings, Second Section, issued judgements 1505/2018 of 16 October, 1523/2018 of 22 October, and 1531/2018 of 23 October, annulling Paragraph 2 of Article 68 of the Regulation Regarding Property Transfer Tax and Documented Legal Procedures, adopted by Royal Decree 828/1995 of 29 May. It later changed its mind on 6 November 2018, when the Plenary of the Chamber for Contentious Administrative Proceedings of the Supreme Court determined that the obligation to pay the tax should revert to the borrower, who receives the money.

Finally, by means of Royal Decree Act 17/2018, the executive established that the lender will be considered a taxable person, establishing the obligation to pay the tax for those who lend the money, mainly banks, in the case of loan deeds with a mortgage guarantee.

In spite of appearances, we are living in a productive period at the normative level for the Canary Islands, and this balance of power, the essence of a democracy, is once again playing its part.
This is the case with the fluctuations in banana subsidiaries, both on the part of the judiciary, with conflicting judgements, and the executive, with binding consultations that are also conflicting, which have undermined judicial certainty.

This situation was finally resolved by the legislature with the publication of Act 8/2018 of 5 November, amending Act 19/1994 of 6 July, amending the Economic and Fiscal Regime of the Canary Islands. It clarifies any doubt regarding the intentions of the legislator and establishes that for the purposes of calculating the yield derived from the sale of tangible property produced in the Canary Islands, the specified subsidies will be part of the same, hence their inclusion for the purposes of the allowance.

What is really the general overriding interest? The one defended by the executive? The one defended by the legislature? The one defended by the judiciary? Everyone has the obligation to act in the general interest, but the general overriding interest is to keep working towards improving the separation of powers so that they monitor one another and prevent abuses of power for the good of democracy.

Means are not to be confused with an end, and these powers are means and not an end, which is the general interest: promoting the conditions so that the liberty and equality of individuals and groups in which they are involved are real and effective; removing obstacles impeding or hindering their fulfilment and facilitating the participation of all citizens in political, economic, cultural and social life; and respecting people’s dignity, as established in the Spanish Constitution of 1978, and under this, Organic Law 1/2018 of 5 November, reforming the Statute of Autonomy of the Canary Islands, which requires that we exercise powers with responsibility, without losing sight of the overriding general interest.

In 1777, one of the founding fathers of the United States of America, Alexander Hamilton, referred to an emotion, happiness, as a goal when writing about the separation of powers in a representative democracy. This takes us back to Miguel de Unamuno with his deep critical thinking for whom, I am sure and I say this not as an expert in this area, the Spanish Constitution of 1978 would have exceeded all his expectations of solidarity, respect for the freedoms of individuals, order, balance of powers and respect for the coexistence of the different languages.

Critical thinking is based on knowledge derived from study, education, training and information, from overcoming prejudices and learning from experience and history, which should not be ignored, and not from promoting and mocking stereotypes. People are not defined by the system that governs them, but rather their own actions as individuals.