Business Over Tapas (30th May 2013)
By Lenox Napier and Andrew Brociner
A digest of this week's Spanish financial, political and social news aimed primarily at Foreign Property Owners: with Lenox Napier and Andrew Brociner. For subscriptions and other information about this site, go to http://businessovertapas.blogspot.com - [email protected]
Note: Underlined words or phrases are links to the Internet. Right click and press 'Control' on your keyboard to access.
You can't do much about the corruption here, which is a way of life. The judge investigating donors to Luis Bárcenas fund for the Partido Popular was stymied earlier this week when the Fiscal Anticorrupción – the senior anti-corruption prosecutor – wouldn't allow the donors: huge building interests – to be questioned.
So, let's talk about waste. Not the uncompleted 184 kilometres of Almeria - Murcia AVE, work on which now not to be resumed until at least 2020 (if at all), nor the money spent on ghost airports and unused motorways across the country, let me write about a story from our local paper. The tourist department of the Almería diputación sent some messages out by Twitter last week to Spaniards living, working or visiting in London. The diputación was going to hold a presentation in a park near London Bridge, appropriately in Potter's Field, to promote our province's numerous charms, give away tee-shirts and import a Spanish comedian, all for the London Spanish to enjoy a jolly day. It probably didn't even cost much, and the half day shopping in London was probably a nice treat for the tourist department. But, what's the point of promoting Spain to Spaniards working or on holiday in London?
And, while I'm on the subject, shouldn't they have looked up the meaning of 'a potter's field' in Wikipedia?
'Justice' (justicia) has returned to give another setback to the Andalucian plan to 'regularize' as many as possible of the 250,000 'illegal dwellings' (that no one noticed being built across Andalucía in the first decade of the century). In a recent ruling against the builder of a villa on undeveloped land, the Seville Audience (a political court) believes that the document adopted by the Administration in January 2012 is only the 'legislative expression of the desire to provide a legal instrument to administrations with competence to order irregular situations'. That is, a desire but not a decree to legalize houses built against the law.
A councillor in Zurgena, Almería, the beleaguered town where the ex-mayor is in court for allowing 'illegal' houses to be built and sold to Northern Europeans, is the Englishman Jim Simpson. Here's a piece from his blog about the day that Bernadette Gallagher, a section Consular from the British Embassy in Madrid, came to visit: - 'The meeting gave Ms Gallagher an overview of the history of persecution experienced by Zurgena at the hands of the Junta de Andalucía over the past seven years. During the meeting I was afforded a few opportunities to express our feelings and our hopes that in some way the Embassy (whilst I acknowledges that they could not interfere with a sovereign countries legal system) could bring some pressure to bear in such blatant political actions that we were suffering. I also gave her a copy of the court ruling re Calle Nervión and we demonstrated how biased that judgement was by showing her the ruling and then goolzoom pictures of Los Carasoles. She seemed as amazed, as I first was, at this ruling. The solicitors confirmed for Ms Galagher the facts, regarding these spurious court actions. It felt so strange to me that, here we were, in a small town hall in Spain with two solicitors, three independent people and three politicians, all bar one of whom were Spanish, and we were effectively asking the British Embassy to help us!!
The story from Property Showrooms that begins: 'New regulations allowing foreign Spanish property investors to gain residency are expected to give the housing market a much needed boost. A new law expected to come into force in July allows non-EU residents to get automatic residency in Spain if they invest €500,000 or more in a property. Given the falls in property prices in Spain since the financial crash - an average of 45 per cent across the country and around 40 per cent in the capital and major cities - housing could be a ripe investment opportunity'...
Brings this observation from a reader: 'Note the threshold has jumped from €160k to €500k. But is this really residency or just an entry visa waiver? Not clear. Will the new “residents” need to file Asset Declarations? Will their governments oblige with fiscal information?
How will this sit with other EU governments, especially those in the Schengen arrangement with open borders?'
A similar report comes from Property Community: 'After months of speculation, the Spanish government has given the go ahead for a new law granting automatic residency to non European Union nationals buying property worth at least €500,000. The law, set to be enacted in the coming months, provides certainty for estate agents in Spain targeting non EU customers, particularly the Chinese and Russians who are increasingly interested in investing in property in Spain.
The new law puts Spain on a par with Portugal but behind Cyprus which has a minimum investment of €300,000 to qualify, and Greece at €250,000. Barcelona based estate agency Lucas Fox has reported a sustained increase in Russian, Chinese and Asian buyers in the last few years'...
Next thing we know, they will be letting in Las Vegas financiers soon to build huge casinos and even allowing smoking at the roulette table if the money is good. Oh, right...
An amusing take in the Telegraph on the Britons buying abandoned villages and hamlets in rural Spain: '...An Englishman recently bought a hamlet in Asturias for less than £40,000 and Spanish property agents claim that almost a third of such properties are being sold to Britons. Many of the hamlets and villages have long been abandoned in the northern regions of Asturias and Galicia and with the economic downturn are being put on the market by families in need of cash. Even if owners wanted to hang on to the properties, most simply haven’t the funds to invest in renovation work'...
'The Organization for Economic Cooperation and Development has revised downward its forecasts for the euro area and points out that a 'slow recovery' won't prevent the unemployment rate from exceeding 28% in Spain.
In its semi-annual Outlook report, the OECD has indicated that the GDP of Spain in 2013 will fall by 1.7%, which means a not only worse outcome than had been estimated in November (- 1.4%), but also the last announced both by the Spanish Government (- 1.3%) and by the European Commission (- 1.5%).
By 2014, the comeback will also be more hesitant than the projected six months (0.4% instead of 0.5%) and that is what will lead to a level of unemployment which 'will exceed 28% prior to stabilization'. These forecasts of unemployment exceed those of the Government, which predicted that unemployment in 2013 would be 27.1% and 26.7% in 2014'... From El Huffington Post. More on this in English at 'OECD: Europe remains threat to world economy' from Associated Press. The Spanish Minister of Labour, Fátima Báñez, immediately claimed that this year will be the last of the crisis and that in 2014 Spain will begin to grow and create jobs. (El Mundo late).
The cunning plan of the PSOE to solve Spain's problems is based on getting a foot in the door through partnerships with the European Union, the Government and the main political parties, to 'convene a grand bargain'. But the plan also includes a grand statement: 'Nothing will replace construction as an engine of employment'. Moreover: without it, new jobs will never be created 'in quantity'.
So said Alfredo Pérez Rubalcaba in Seville earlier this week, where he presented party strategy together with José Antonio Griñán, President of the Junta de Andalucía. 'We must not forget the building. We cannot', he warned. According to him, the construction of new homes at the 2007 pre-crisis rates is not possible (he says '600,000' a year), but the State should invest in rehabilitating the current collection of homes. Perhaps he is thinking of the 3 million homes which are currently empty (or with squatters) and, mostly, protected lethargically by the banks, who won't expect any demolition orders or, really for that matter, many wealthy Russians either. As for the Spanish, you see, with this crisis, they can't afford them.
One may recall that it was precisely the PSOE that ordered the demolition, in January 2008, of Len and Helen Prior's house in Vera, Almería. It wasn't near the beach, nor on the motorway, nor on the proposed AVE route. It wasn't in a floodplain (like nearby Vera Playa, Puerto Rey and Pueblo Laguna). It couldn't be seen from the road and, indeed, was merely one of eight other houses (all still standing) in a quiet barrio. It may not have made much difference to the Spanish media when it was arbitrarily demolished (only twenty kilometres away from the 20 storey high Hotel Algarrobico on the Carboneras shoreline and in a National Park, which with PSOE backing, still rots on the beach). What is one foreigner after all, well, all right two foreigners? The Priors are still there, 65 months later, defiantly living in their converted garage without water and electricity. In Northern Europe, this is a big story. But there is more, the 12,500 'illegal homes' in the Almanzora Valley, almost all British owned. All apparently condemned by the PSOE in far-away Seville (once the cheques cleared). There are, in fact, 250,000 'illegal homes' just in Andalucía, again (y insisto) thanks to the PSOE and the ecologists in Seville. That works out at some 50 billion euros spent, lost and wasted. Perhaps the same again in widely-accepted frustrated sales to Northerners (which is why they are now going after Russians, Serbs, Chinese and other people who are eager to leave their own countries). 250,000 illegal houses. Half a million thoroughly distraught people. That's the same number of homes, by the way, as there are viviendas in the City of Málaga. How did they not notice them being planned, built, promoted, sold?
So Mister Rubalcaba, who is going to buy these new refurbished houses of yours? The Russians? (some material from El Huffington Post)
Mortgages slump again, says El Mundo: - 'A new statistical bump. Never before in Spain has the mortgage activity shown such poor numbers. In March, banks across Spain only granted 16,270 mortgages to buy homes, which is 34.1% less than a year ago and, indeed, well below the 24,197 that were signed in February, according to data made public by the National Institute of statistics (INE).
Just when some analysts voices suggest that credit could be returning to flow into the Mainland economy, the statistics show numbers down to historical records: capital lent by banks for the purchase of homes stood at 1,573 million euros in March, which translates to 38.5% less that 12 months ago.
The INE reports 35 months with falling records, but the fall of March (almost 9,000 mortgages less than in February) is even more pronounced than anything seen before, since the current records are already very low. In 2011, when it was thought that mortgage statistics could not fall further, 43,176 loans, almost three times, were signed and 4.855 million euros were provided'...
The Public Deficit is getting out of hand, at El País in English: 'Despite spending cuts and tax hikes, the Spanish government is still struggling to rein in the public deficit. The shortfall in the central government’s books widened in the four months to April as a result of increased spending on unemployment payments and interest on debt, while tax revenues fell due to the downturn in the economy, the Finance Ministry said Tuesday.
The difference between what the government took in and outlays in the period amounted to a record 25,007 billion euros, equivalent to 2.38% in national accounting terms. The ministry said the shortfall in the same period a year earlier was 2.36%, virtually the same result. In the first quarter of this year, the deficit was 1.63% of GDP.
Financial costs climbed 10.6% from a year earlier to 12.591 billion euros as a result of growing debt. Tax revenues declined 6.7% with a notable fall of 9.9 percent in IVA collections, despite rates being hiked in September of last year'...
'Nothing is free', says Thursday's El Huffington Post, 'for when Brussels opens one hand with the deficit, she also closes the other, insisting on certain painful reforms. By September of this year, the Commission wants to hold an evaluation of Spain's labour reform and the introduction of changes if it is shown that the problem of employment continue at, or near, the present rate.
At the end of the year, Brussels also wants to see a sustainable pension system in the medium to long term.
In March 2014, the EU Executive has asked Mariano Rajoy to present a "systematic review of the tax system" that includes a rise in IVA on certain products that are now taxed at the reduced rate (10%), and that in the eyes of the community technicians should be at 21%'.
From City AM: - 'Troubled Spanish lender Bankia received €11bn (£9.4bn) in bailout funds from Europe Wednesday in the latest part of the plan to get the bank back on its feet.
The institution was hit hard by Spain’s property crisis, which has left banks across the country devastated with commercial and residential property losses.
But despite the additional support from the government’s bailout fund the lender is unlikely to see any solid recovery quickly'...
World Asset Declaration:
From El País in English ...'According to figures provided last week by Prime Minister Mariano Rajoy, 131,411 taxpayers declared assets held overseas, of which 129,925 were individuals and the rest companies. Individuals declared 67.1 billion euros and companies 20.6 billion'...
The foreign residents, perhaps frightened by the threats from Hacienda, will have made up about two thirds of the reported holdings abroad. Pity Rajoy couldn't mention that. Does the Government really want to frighten off foreigners from living here? Each 'pareja' buys a house, a car, white goods and even creates a few jobs in the moribund villages of the coastal provinces. They bring in money to Spain every month of the year. There are perhaps a million Northern Europeans (for want of a better description) living in Spain full-time. Between the Wealth Tax, the cull on 'illegal houses', the Valencia 'Land Grab', the removal of our Residence Cards and so on, We can only ask: What is Happening?
Jávea Briton faces five-figure tax bill on UK home thanks to Form 720 By Samantha Kett, Costa Blanca News - 'Government claims that the asset declaration is 'not a form of taxation' were shattered this week when Costa Blanca News was informed of the case of a Jávea Briton who faces a tax bill of €30,000 for the sale of his UK home which he declared on the now-infamous form 720.
Barry had bought the property, which became his main residence in 1997 with his late wife, Judith and sold it in January this year, having moved to Spain in 2009. And he has been told by his accountant that he will have to pay €30,000 capital gains tax bill at the end of the year. Costa Blanca News was contacted by Barry's partner, Lesley, who has lived in La Marina, San Fulgencio for 10 years and says the couple are going to have to return to the UK as a result.
"Apparently Barry's bungalow in Cornwall is considered a second home - even though he doesn't own any property in Spain," she explained. "And the capital gains tax calculation doesn't take into account any of the improvements he carried out on the house, and the time that he owned it when he was not living in Spain, between 1997 and 2009."
It was during this time that the house increased in value, Barry explains: "Judith and I were both divorced when we met, and we pooled our resources to buy a run-down old bungalow and spent over 80,000 pounds doing it up - replacing the windows, the fence – everything. I had it valued in 2009, before I moved to Spain - Judith died in 2004 - and it was worth 250,000 pounds. On the strength of that I took out a re-mortgage and we used the money to extend Lesley's house, and all I've had to do with the tax-man in Spain until now is paying tax on the interest of the money I brought with me. I took out residence because it seemed the right and legal thing to do, but my pension is paid from the UK and I have no assets here - I'm not on the deeds to Lesley's house. In the end, I sold my bungalow for 215,000 pounds and paid back the mortgage - so in the period during which I owned the house and lived in Spain, it lost 35,000 pounds in value. And in fact, if you take the money Judith and I spent on turning it from a wreck into a nice house, I probably haven't earned much capital on it at all. Surely any tax liability should be payable on the time between my moving to Spain and selling the house, not retrospectively applied?"
The couple sought advice from a second and third accountant and were given the same verdict from each.
"I've only ever put money into the Spanish economy, never taken out of it - I haven't even got a SIP card to use the public health service," laments Barry. "Taking this money off me, which I earned years before I came to Spain, must be illegal."
As a result of this harsh ruling, the couple are due to move back to the UK in the next few weeks. They do not intend to live in Spain again until the asset reporting law is reviewed.
"Our accountant said the law was to catch the Spanish people who were dealing in black money and sending millions out of the country, not the ex-pats who do everything by the book. "So we've decided to rescind our residence and go back to the UK for at least 183 days, see the family, rent a flat, and tour round in our motor home.
Barry and Lesley spoke to the local council in San Fulgencio, who had been reassuring residents that the asset reporting law was purely an information-gathering exercise.
It has now joined Jávea council in the campaign to the ministry of finance in Madrid to review the law. "We were told the tax office doesn't have the administration to be able to chase up and investigate all the ex-pats living on a pension, and our accountant told me, 'you're my worst-case scenario'. But we know of someone else who has owned a property in the UK for 20 years - he's renting over here - and is selling it soon to buy a home in Spain. He'll make 250,000 pounds on it, and he's been told he'll have to pay 21% of that to the Spanish tax authorities... I've just turned 70, and I don't need this," Barry adds. "I just wanted to enjoy my retirement with my hard-earned cash."
The couple would be interested to hear of anyone else in a similar situation, and say they have signed the petition found here.
(From a reader): There are a few basic things Barry can do to establish residency again in the UK. If he rents property in the UK and pays his community charge then that is clear proof of residence...
If you come back to Britain intending to stay for three years or more, you will be considered ordinarily resident straight-away; He therefore needs to contact HM Revenue & Customs to let them know that you're coming back to live in the UK permanently. You can do this by phone or email in the first instance. There is a lot of information on their website about how to contact
If you were a UK resident and moved abroad for less than five full tax years before becoming resident in the UK again, you will have been 'temporarily non-resident' for the period you were away. For more information about temporary non-residents he needs to see a professional it is rather complicated. Or speak to HMRC That is free
· Contact the Department for Work and Pensions to transfer your pension back to a UK bank account. They can also help you find out whether you're entitled to any benefits.
· Before you leave your current location abroad, you should let your doctor know that you will no longer need to be on the medical roll and are returning to the UK. If you have private medical insurance, you should let them know of your change of circumstances. Some may be able to simply transfer your policy to the UK, while others may require you to cancel your policy before leaving. Also he needs to inform his doctor in Spain that he is leaving and ask for his records to be sent to doctor in the UK.
· He needs to sign on with a GP of the area re being eligible for NHS care as a returning resident. That will also firmly place him back on UK soil
These are just some of the steps that can be taken. I have always found the International Pension and HMRC very helpful so do telephone or email them.
From El País in English: 'The opinion polls all agree: Spain's two-party system is suffering from a kind of burnout that has not been seen in recent years. And the main beneficiaries of the steady decline in voter support for the Socialist Party (PSOE) and the Popular Party (PP) are the leftist coalition United Left (IU) and the centrist party Union, Progress and Democracy (UPyD).
IU - which is a veteran association of communists, republicans and environmentalists, and typically garners between three and 10 percent of the vote at general elections - and the UPyD - a newcomer to the political scene, which has been quickly gaining traction on a socially progressive, economically liberal program - are both facing a turning point that will test their organizations, their internal structures and their campaign promises.
A recent simulation of election results conducted by the polling firm Metroscopia showed IU and UPyD obtaining 16 percent and 11 percent of the vote, respectively, more than twice what they achieved at the November 2011 general elections'...
'Elections to the European Parliament will be held in all member states of the European Union (EU) between 22 and 25 May 2014, (in Spain on May 24th) unless the Council acting unanimously decides to change the dates. It will be the eighth Europe-wide election to the European Parliament since the first direct elections in 1979'. (Wikipedia). Who will the Foreigners in Spain vote for – the candidate MEP list from the Partido Popular (who, obviously, won't do anything for us) or the candidate MEP list from the PSOE (who, obviously, won't do anything for us either). Anyone out there want to start a pro-european residents party?
'The severe economic crisis in Spain drives ever stranger flowers. After years of declining prices, farmers must deal now with a problem, which while not new, has assumed threatening proportions: the thefts on the fields. The number of offences has increased further since the beginning of the year.
According to ASAJA, an association of Spanish farmers, the number of thefts rose in the first three months by 20 percent. In the province of Alicante, the damage amounted last year already to over 25 million euros through theft and wanton destruction. The situation is not much better in other areas such as in Valencia or in the green North of Spain'... (From Hamburger Abendblatt). - The Spanish press talk of armed guards in Andalucía, while the olives are being picked. In fact, two guards were shot with one dead, in a Murcia plantation recently.
'Almería wants to become a laboratory to test new strategies to combat theft in the countryside. Private security companies, alarms, and video surveillance cameras are complemented by public plans developed by the national police, the Civil Guard and the various local police in the province'... Thus starts an article in La Voz de Almería on a speech given by senior politicians and police. Almería is famous for its large number of immigrant workers living in poor conditions, as well as its giant spread of 'plastic farms'.
Following on from the Telegraph article about grabbing your money and heading for the airport, here's the UKIP leader Nigel Farage in El Mundo last Saturday: '"The British who are in Spain should get their money out as soon as possible". Words from Nigel Farage, the leader of the emerging United Kingdom Independence Party (Ukip), who took advantage of his recent encounter with foreign media to predict that our country will go the same way as Cyprus and he made his appeal to his 750,000 compatriots settled on our shores'... The photograph is silly too.
'The European Commission is prepared to discipline Spain for the refusal of some public hospitals in tourist areas to accept the European Health Insurance Card, which allows EU citizens to access public health services, says the Commissioner for Social Affairs, László Andor.
"The Commission is still in negotiations with the Spanish Government in an attempt to put an end to the continuous practice of some hospitals in tourist areas' refusal to accept the European health insurance card", explained Andor in response to a parliamentary question from a Belgian MEP.
"This practice violates the EU legislation and the Commission will act in its role as guardian of the Treaty to ensure that the rights of the citizens of the EU are respected", warns the Commissioner of Employment'... From Hosteltur. More at El Mundo.
The Boston Globe doesn't like bullfights: - 'Spain's bullfighting industry has been battered in recent years, a victim of declining popularity and economic recession. The number of “corridas” has fallen sharply, along with attendance at the bloody spectacles, which invariably end with the death of the animal. In 2007, according to The Wall Street Journal, there were more than 1,000 bullfights registered in Spain; this year promoters will schedule only half as many. In a 2011 survey by the ministry of culture, the number of Spaniards saying they attend bullfights had dropped to just 8.5 percent, a new low'...
According to the French weather bureau Metèo, as reported by El Huffington Post, there probably won't be any summer this year, with the seas colder than usual together with weak solar activity causing twice-as-likely rain and temperatures two degrees below normal. In August there will be short hot spells followed by heavy electric storms, according to the French weather people. The best summer weather will be in September and October. So being your umbrella if you are planning a visit!
An exhibition of the Catalan painter Joan Miró in Munich promotes the image of Spain as a cultural destination: 'Under the title, “Get inspired”, the Spanish tourism board in Munich recently inaugurated an exhibition of Joan Miró on the island of Lindau, Bavaria (Germany). According to Turespaña, the goal is to increase Spain’s appeal as a cultural tourism destination. This is the third in a series of exhibitions by the Landau Municipal Museum dedicated to artists of the Classic Modernism age, following those of Picasso and Chagall.
The exhibition, open through September 1st, coincides with the anniversary of the creation of the Turespaña’s logo, which is a work of the painter. A collection of 30 works have been sent to the museum, among them watercolours, gouaches, sculptures, posters and collages, some of them from private collections and rarely seen in public. All the works make special reference to Catalonia and Mallorca as destinations where Miró lived, worked and found his inspiration.
Lindau, located in a strategic tourist enclave made up of Bavaria, Baden-Württemberg, Austria and Switzerland, is an island that receives 3.5 million visitors a year. The entire city has been decorated in a Miró motif, and 50,000 people are expected to visit the exhibition, which has a budget of 400,000 euros'... (From Marca España)
The Spanish Economy By Andrew Brociner. Andrew is away this week
'Punk legend Joe Strummer has had a square named after him following a campaign by local residents. More than 2,000 residents of Granada, where The Clash front man became a frequent visitor, had signed a petition calling for him to be honoured.
The singer’s widow, Lucinda, and daughter, Lola, unveiled the Plaza de Joe Strummer at a ceremony last week. Strummer, who name-checked the city in The Clash’s London Calling album track Spanish Bombs, died of a heart attack at the age of 50 in 2002'... From The Olive Press. We are still waiting for word from Almería about The Pogues (see 'Fiesta' here), although there is a statue honouring Beatle John Lennon.
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