Spain retirees battle against ‘unfair’ back taxes on foreign pensions

Eyeing a year-end general election, Spanish retirees who worked abroad have stepped up their protests against the cash-strapped government's bid to collect back taxes on their foreign pensions.

Spain retirees battle against 'unfair' back taxes on foreign pensions
Pensioners are furious over taxes on pensions. Archive photo: Gerard Julien / AFP

When Spain went into recession in 2008, the government scrambled to find ways to boost state coffers, and since 2013 has tapped a new vein: back taxes on foreign pensions from hundreds of thousands of former expatriate Spaniards who returned home to live out their retirement.

In some cases people have been given just 15 days to pay up.

“These people have suffered great moral and economic harm,” said Eva Foncubierta, the president of the Spanish Federation of Returned Emigrants (FAER).

“These former emigrants greatly contributed to Spain's development and they don't deserve to be treated this way,” said Foncubierta, whose parents emigrated from the southern Andalucia region to the Netherlands and now find themselves targeted by the tax office.

About 800,000 people are affected by conservative Prime Minister Mariano Rajoy's measure, according to FAER.

Foncubierta points out that Spanish pensioners are only required to pay tax on annual income above €22,000 provided they have only one source for the revenue.

The problem is that the tax office considers a basic pension and a supplementary pension, even if they are paid by the same country, to be two separate revenues, resulting in a lowering of the tax threshold.

“We demand that pensions be considered as a single income,” said Maruchi Alvarez, the spokesman of a Galician association of emigrants.

Chained to tax office

By the end of July around 145,000 retirees had settled their tax bill, increasing state coffers by €309 million ($352 million), according to budget ministry figures.

“This is robbery and an injustice,” said Miguel Martinez, who worked as an autoworker in Paris between 1964 and 1974 and receives a monthly pension of €330 from the French state.

He was shocked to receive a registered letter last year demanding the payment of back taxes on his French pension for the past five years of around €5,000 – a sum equivalent to one third of his total yearly income.

“Before I paid €85 in taxes on my Spanish pension of € 11,700.

When the extra €4,000 (in pensions) from France were taken into account, the amount jumped to €962,” he said.

Martinez, who lives in the town of Callosa de Segura in the eastern Mediterranean province of Alicante, has chained himself to three different tax offices in protest.

He says his anger is fuelled by the fact that he has a letter issued in 2011 by the tax authorities certifying that his French pension was not taxable.

“When 800,000 people of this age are affected, it is hard to believe that they all decided to defraud at the same time,” said Foncubierta.

Juan Antonio Pichel, who lives in the northwestern region of Galicia, was asked to pay €8,000 to the tax office in just two weeks.

“I was forced to take a loan from the bank,” said Pichel, who worked for years as a construction worker in Switzerland.

First success

Associations set up to defend the rights of emigrants, mostly in Galicia and Andalucia, two high-migration regions, have staged noisy street protests.

The groups obtained their first success last year. The Spanish tax office agreed to stop imposing fines for late payments on back taxes and reimburse the €20 million  in fines it has already collected.

The budget ministry says it has paid back €13 million in fines to 32,414 people as of the end of July.

“But as the elderly themselves must take steps to be reimbursed, there is still seven million euros that have not been claimed,” said Foncubierta.

As a tight general election nears, the retirees are planning more protest actions.

“We will take advantage of this election period to request special treatment,” said Foncubierta.

Foncubierta recommends that emigrants planning to return to Spain check first how much tax they will have to pay.

“They might be surprised,” she said.

 By Antonio Rodriguez

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Spain’s middle-class youngsters the most likely to end up poor across all EU

Spain leads the ranking of EU countries with the highest risk of young people ending up in poverty as adults, despite coming from families without economic difficulties.

Spain is the fourth EU country with the highest inherited poverty
Spain is EU country with most middle-class young people who end up poor. Photo: Jaime ALEKOS / AFP

Spain is also the fourth EU country with the highest rate of inherited poverty risk, according to Eurostat, the EU Statistical Office.

Data on intergenerational poverty indicates that there is a correlation between the financial situation of the household you grew up in and the risk of being poor when you reach adulthood and in Spain, there is a strong link. 

The latest statistics available from 2019 show that the at-risk-of-poverty rate for the EU was 23 percent among adults aged 25 to 59 who grew up in a poor financial situation at home when they were 14 years old. This is 9.6 percentage points more than those who come from families without financial problems (13.4 percent). 

READ ALSO: Spain’s inflation soars to 29-year high

How the situation in Spain compares with the EU

Spain has become the EU country with the highest risk of poverty among adults who grew up in families with a good financial situation  – 16.6 percent.

This was followed by Latvia with 16 percent and Italy with 15.9 percent.

That statistics also show the countries where it is less likely to be poor after growing up in households without economic difficulties. These include the Czech Republic (5.9 percent), Slovakia (7.9 percent) and Finland (8.5 percent).

The overall poverty rate in the EU decreased by 0.1 percentage points between 2011 (13.5 percent) and 2019 (13.4 percent), but the largest increases were seen in Denmark (1.9 points more), Portugal (1.8 points), the Netherlands (1.7 points) and Spain (1.2 points).  

On the other hand, the biggest decreases in the poverty rate were seen in Croatia (-4 percent), Lithuania (-3.6 percent), Slovakia (-3.5 percent) and Ireland (-3.2 percent).

READ ALSO: Spain’s government feels heat as economic recovery lags

Inherited poverty

The stats revealed that Spain was also the fourth country with the highest rate of inherited poverty risk (30 percent), only behind Bulgaria (40.1 percent), Romania (32.7 percent) and Italy (30.7 percent).

This means that children of poor parents in Spain are also likely to be poor in adulthood. 

The countries with the lowest rate of inherited poverty risk were the Czech Republic (10.2 percent), Denmark (10.3 percent) and Finland (10.5 percent).

The average risk-of-poverty rate for the EU increased by 2.5 percentage points between 2011 (20.5 percent) and 2019 (23 percent), with the largest increases seen in Bulgaria (6 points more), Slovakia and Romania (4.3 points), Italy (4.2 points) and Spain (4.1 points).

The biggest drops were seen in Latvia (-8.5 points), Estonia (-8.0 points) and Croatia (-2.3 points). 

The largest gaps in people at risk of poverty when they reach adulthood were in Bulgaria (27.6 percentage points more among those who belong to families with a poor economic situation as teenagers compared to those who grew up in wealthy households), Romania (17.1), Italy (14.8), Greece (13.5) and Spain (13.4).