(Bloomberg) -- Spain’s governing Socialist party reached an agreement with partners in parliament to extend a windfall tax on banks for three more years.
Plans for a similar levy on energy firms will be shelved.
The banking levy will now tax commission and interest margins and will be in place for three years starting in January, according to the draft proposal filed late Wednesday by the budget ministry, a copy of which was seen by Bloomberg News. The tax will apply on business in Spain for both local and foreign lenders, and will range from 1% to 6%.
According to César González-Bueno, chief executive officer of Banco Sabadell, windfall taxes for Spanish banks are going to continue, although are likely to be “relatively minor” to what they have been previously.
“So that should be in relative terms, some improvement,” he said in an interview with Bloomberg Television.
Shares of Spanish banks mostly rose on Thursday, with Banco Santander SA gaining as much as 3.1% and CaixaBank SA climbing as much as 1.7% after earnings. Sabadell shares slipped after third-quarter results, with González-Bueno saying competition issues around plans by BBVA SA to acquire its smaller rival are “very, very significant.”
Read: BBVA, Sabadell Clash on Competition as Spain Deal Verdict Nears
The agreement to extend the tax was reached as part of a broader fiscal package the Socialist Party negotiated with several smaller parties, notably the Basque nationalists of PNV and the Catalan separatists Junts, both of which are pro-business. The proposal may still undergo changes.
While the government had also aimed to extend the energy tax, it faced strong resistance from Junts, which said that doing so would affect investments in parts of Catalonia.
The two taxes were put in place in 2022 as extraordinary levies for 2023 and 2024, as banks benefited from an increase in interest rates and energy firms gained from a surge in electricity and oil and gas prices. The companies criticized the levies, saying they charged revenues, among other issues.
Repsol SA, Spain’s main oil producer and fuel maker, had in recent weeks led a charge against the energy tax. The company said it would halt plans to develop green hydrogen projects.
(Updates with Sabadell CEO comments starting in fourth paragraph, Spanish bank shares in sixth)
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