Spain's corporate tax take has tumbled by almost two thirds from pre-crisis levels as small businesses fail and a growing number of big corporations seek profits abroad to compensate for the prolonged downturn at home.
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TAX APPEAL
Spanish companies' heightened search for foreign markets to cushion a weak domestic business has come with an added bonus for their bottom line in more favorable tax regimes.
In 2010, 30 of Spain's 35 blue chip companies had subsidiaries in territories considered tax havens, according to the latest report by Spain's Observation Group for Social Corporate Responsibility.
The organization, which is partially subsidized by the Labor Ministry, put the number at 18 before Spain's economic crisis began.
"Not only tax reasons justify this trend, but also the internationalization of Spanish groups and the search for new markets, especially in the context of the crisis seen in Spain," said Josep Serrano, Senior Manager of Transfer Pricing & International Tax at Deloitte in Spain.
The use of subsidiaries in tax havens to reduce tax bills has been a rising global trend in recent decades, tax campaigners said.
In Spain, companies also benefit from exemptions on dividends from foreign subsidiaries, Deloitte's Serrano said.
Spain has a headline corporate tax rate of 30 percent, broadly in line with other large European economies. Switzerland, however, has a headline rate of 8.5 percent, and lawyers say deductions can be made to reduce this further.
"A fundamental right of EU law is the freedom of establishment. All companies and taxpayers look after their tax affairs, and if they can pay a lower rate somewhere else, it's better for their business and natural that they would do so," a global tax lawyer based in Spain said.
Inditex, the world's largest clothing retailer, with a presence in 85 countries and two buying centers in Switzerland, posted a 10.3 percent rise in pretax profit in 2011, but tax paid on profits fell to 24 percent from 25 in the same period.
The falling effective tax rate contributed to an 11.7 percent rise in net profit.
Inditex, owned by Forbes-list billionaire Amancio Ortega, denied it had a strategy of sheltering profit in tax havens but said the nature of its business entailed paying taxes in the countries where it generates its sales.
Among second-tier Spanish blue chips, global infrastructure firm ACS, run by another Spanish billionaire, was present in 11 territories considered tax havens by various international authorities in 2011, up from eight in 2010.
Of the 11, seven are considered tax havens by Spain.
Part of the rise is because it bought a majority stake in German builder Hochtief, which gave it access to new markets through subsidiaries.
"We don't do anything other than our normal business activity in these countries, and we comply with all tax laws in all of the countries where we are present," ACS said.
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