With its green curtain of hanging gardens, the Planeta building is one of Barcelona’s most recognisable office blocks. Earlier this summer, it was acquired as part of a Monopoly board spending spree by Spain’s richest man, the Zara fashion label founder Amancio Ortega.
Through his Pontegadea family office, which invests his personal wealth, Ortega has also just snapped up the five-star Hotel Banke in Paris, an apartment building in Florida, and a half-share in the operator of Teesport in the north-east of England, adding to a property portfolio already worth €20bn. Why the rush?
Ortega is poised to receive a record dividend of €3.1bn (£2.7bn) this year from his shares in Zara’s parent group, Inditex. He is reportedly racing to spend the windfall, which would otherwise be subject to wealth taxes. Sources close to Pontegadea told the Guardian it was not investing to avoid tax, but following its mandate “to create wealth from the original assets, maintain it, make it grow, and consolidate it over generations”.
It invests all dividends from Inditex “and any other income from its own economic activities every year, no matter the amount”, they said.
Whatever the reason, the Ortega property portfolio has grown rapidly in recent years, making his family office one of Europe’s biggest real estate owners.
As chancellors around Europe cast about for ways to repair the damage to public finances caused by successive global shocks, there is a growing clamour for more effective ways to tax the largest private fortunes.
Spain is one of only three European countries (along with Switzerland and Norway) to still collect wealth taxes, and policymakers are looking to Madrid for lessons in what works – and what doesn’t.
In the UK, the former Labour leader Neil Kinnock and the party’s former shadow chancellor Anneliese Dodds have joined those calling for Rachel Reeves to introduce a wealth tax when she sets out her budget in the autumn. As the chancellor looks at the options, which could also include changes to inheritance tax, members of her own party are pushing for a debate in parliament about introducing a 2% annual levy on those with assets over £10m, which they say could raise £24bn. In France, a similar proposal aimed squarely at the ultra-rich with assets of more than €100m was approved by the lower house but was rejected by the senate.
Wealth taxes are designed to take a percentage of a person’s assets each year. Once fairly common, they have gradually fallen out of use, replaced by levies that bite when money changes hands, for example, through dividend payments, inheritance and sales of shares or property.
Solidarity tax arrives
Spain’s wealth tax dates to 1978, a year that marked the transition to democracy from dictatorship under Franco. Regional governments receive the revenues collected by the levy, a system that worked well until, after a brief pause during the financial crisis, it was brought back in 2011. On its return, Madrid’s conservative administration responded by discounting the rate to zero. The move benefited the high-earning footballers at Real Madrid, attracted new residents from other regions, and incomers from Venezuela and other Latin American countries, boosting property prices.
In 2022, the conservative-run region of Andalucía in the south, announced that it, too, would cut the rate to zero. In a play on the Spanish term for tax haven, paraíso fiscal, Madrid’s regional leader posted on X: “Andalucíans: welcome to paradise.” Then Galicia, in the north-west, where Ortega is resident for wealth tax, joined the fray by offering a 50% discount.
A source of income that had been providing hundreds of millions of euros a year to support local services, including healthcare, was under threat. The battle to save it became a tussle between the socialist-led central government, headed by Pedro Sánchez, and conservative-run autonomous regional governments.
At the end of December 2022, Sánchez took action, with the solidarity tax on large fortunes. Initially for two years, to help with public spending after the pandemic, it has now been rolled over until the regional financing is revised, which is not likely to happen soon. It was designed in such a way that whatever revenue was forfeited by the regions would be collected centrally. The rate starts at 1.7% for those with net wealth of €3m, rising to 3.5% for fortunes over €10m. It is payable on worldwide assets.
There are allowances: the first €700,000 is exempted, as is €300,000 for the main residence. A cap to help the asset rich and cash poor means that combined income and wealth taxes cannot exceed 60% of income.
Numbers shared with the Guardian by the Ministerio de Hacienda (the Spanish Treasury) show that in the first year, 2023, the regions collected €1.25bn, and the central government €630m; a total of €1.88bn. In 2024, the regions took the logical step of keeping the income for themselves. The total take rose to €2bn.
“The solidarity tax is not a tool to collect revenues for central government, it is a way of forcing regions to collect more,” says Dirk Foremny, associate professor of economics at the University of Barcelona. In that respect, it has worked perfectly. As a revenue raiser, it is limited. The approach from Madrid has been light touch, though the rules could be changed to raise more.
The sums collected are on a par with inheritance tax – already heavily discounted by the regions – which raises about €3bn a year. By contrast, income taxes bring in €130bn. But Foremny says the solidarity tax has a social value.
“This tax is a tool to achieve a more equitable distribution of wealth across individuals. There are good arguments why we don’t want to have a very large concentration of wealth in the hands of very few. Wealth is correlated with political influence and power.” He points to the US and its billionaire tech barons as a warning of what can happen when the scales tip too far.
What is clear is that, two years on, a predicted exodus of the rich, trumpeted in endless alarmist headlines, has not materialised. Forbes counted 26 Spanish billionaires in 2021. This year, it lists 34, with a combined net worth comfortably over $200bn.
“The big fortunes mostly stayed put, filed protective appeals, and hired better structuring teams,” says Marc Debois, the founder of FO-Next, which advises family offices. “A handful decamped to Lisbon or Dubai or any other location; enough for newspaper headlines, not enough for a flight.”
Family exemption targeted
Could the billionaires be made to pay more? Experts point to a big exemption: the one for “family companies”. Originally designed to encourage small- to medium-sized businesses, these structures are also being used by the very biggest fortunes to manage their assets.
There are restrictions. A taxpayer must demonstrate that assets are being used for economic activity, that is, a trade or business. Cash and shares held simply for investment purposes are taxable. Real estate that earns rents is not.
If the family exemption is abolished, Debois says the billionaires won’t necessarily decamp. They are more likely to lawyer up, reduce profits by leveraging (taking on debt), and create holding companies in low-tax jurisdictions such as Luxembourg. “Some money already half‑abroad would finish the move,” he says.” The bigger issue is tens of thousands of mid‑sized family firms rely on the same rule; torching it is politically radioactive.”
Estimates by Julio López Laborda, a professor of public economics at the University of Zaragoza, suggest that 80% of the assets of the richest 1% are not subject to the wealth tax. He says the family company exemption could represent a loss to the Treasury of about €2bn, while the cap on tax as a proportion of income, mentioned above, could account for another €2.5bn uncollected.
Susana Ruiz, tax justice policy lead at Oxfam, which is working with López Laborda on a forthcoming report about wealth taxes, says: “We could be raising at least two to three times more than we are at the moment.”
Cutting public services in order to fund tax breaks, or simply balance the books, can create a doom loop, because it reduces the quality of provision, undermining the consensus on which taxation depends. In Madrid, declines in healthcare provision fuelled resentment among working people and created a sense that private provision was more efficient, says Ruiz. She believes the solidarity tax has helped rebuild confidence. “There is a lot of citizen support behind it. It helps in the perception that the system is fair.”
So far, there is no sign that it has affected growth. Spain was the world’s fastest-expanding major advanced economy last year, outpacing even the US, with GDP up 3.2%. By contrast, growth in the UK and France last year barely scraped above 1%. On the balconies of the Planeta building, and in the country at large, the green shoots are alive and well.
