Goodbye (for now at least) to the Catalan “ADSL tax”
On September 14, 2015, the Constitutional Court (TC) admitted for consideration an action for unconstitutionality brought by the Central Government against Law 15/2014, passed by the Parliament of Cataluña, regulating the tax on the provision of contents by electronic communications services providers and for the promotion of the sector and dissemination of digital culture, otherwise known as the Catalan “ADSL tax”. This tax, which was aimed at bolstering the audiovisual production sector and giving a boost to the Catalan film industry, was applied to telecommunications operators through a fixed charge of 0.25 euros per month on each contract signed in Catalan territory, which was passed on to users.
The Government bases its action on the argument that the Autonomous Community tax in question could overlap with VAT, which is a tax levied exclusively by the State. It claims that although the definitions of the taxable event in either case are not identical grammatically and there are differences in the wording, the two patently refer to the same thing. The challenge is based on article 6 of the Organic Law on the Financing of Autonomous Communities, which stipulates that taxes established by Autonomous Communities cannot be levied on taxable events which are taxed by the State. The Government’s opinion is that the Catalan law encroaches on the competences of the State in the area of taxation and that the Autonomous Community has clearly overstepped its powers.
The taxable event on which the Government’s action focuses is “the availability of the service giving access to contents existing in electronic communications networks through contracting with a services operator, irrespective of the manner in which the service is accessed.” This, in the Government’s view, could result in the re-taxing of specific supplies of goods and services performed in Spanish territory for valuable consideration by businesses or professionals, which is a taxable event for State VAT purposes.
In any event, the TC’s decision is not a ruling on the substance of the case, being merely a temporary suspension of the application of the legislation challenged, with the TC having set itself a period of five months in which to either ratify such suspension or lift it for good. We should therefore know definitively, by February 2016 at the latest, the TC’s position regarding the incompatibility or otherwise of the Catalan ADSL tax with Spanish VAT, and as to whether the Catalan parliament has, as claimed, overstepped its powers. For the time being, and until a judgement is handed down by the TC, the Catalan ADSL tax therefore cannot be applied to operators (nor, ultimately, to consumers). Until then, the situation is that round one has been won by the Government (and, it is to be understood, by operators and their customers in Cataluña).
Garrigues Telecommunications & Media Department
