Bloomberg Tax spoke recently with Jose Luis Migoya, head of international tax at Spanish utility group Iberdrola, about growing international fiscal pressures, keeping up with the company’s busy year of M&A, and how to incentivize a transition to clean energy.
Migoya has worked at Iberdrola for more than 25 years, as the company has grown into one of the leading international renewable operators working across Europe and the Americas.
Bloomberg Tax: 2020 has seen Iberdrola carry out a string of acquisitions in different countries. How has it been handling transactional work amid the pandemic and the accompanying restrictions?
Migoya: There have been some difficulties, especially in the kinds of large transactions we have seen, because this type of work is usually based on in-person meetings, getting in touch with external advisors, etc., and all of this now has to be done virtually.
From a practical perspective, that has probably been more complicated. But it’s not that bad, either. Tax work is about support and is based in analysis of files and meetings that can be held virtually.
I think the challenge is on those directly involved in negotiations, those responsible for development and strategy. For them this has certainly been more difficult without the opportunity to negotiate in person.
Bloomberg Tax: Iberdrola works in the UK through its subsidiary Scottish Power. Do you see Brexit and the recently agreed deal with the EU affecting the company’s tax work in any significant way?
Migoya: I think there are several levels. We have been following the issue closely, though there aren’t too many issues from a tax perspective. It’s true that directives will no longer apply, and there will be a transition to other rules, which could be bilateral agreements etc. But it didn’t concern us too much that the U.K. was leaving in this sense or that there would be significant changes to relationships with headquarters.
From a tax perspective, the greatest concern is what we are seeing now: the customs issue that is complicating what, up until very recently, had been the very straightforward process of moving across borders to import equipment or move employees. Now this is more complicated and will mean more paperwork, bureaucracy and, indirectly, greater logistical difficulty.
Bloomberg Tax: As a result of the pandemic, Spain’s governing coalition has shelved many of its more ambitious tax reform plans until at least next year. How do you see the possibility of increases to corporation and other tax in next year’s budget?
Migoya: I think that both in Spain and the other countries we operate in we are heading into a scenario where different governments will be looking to increase tax revenue however possible. Each country will likely adopt different strategies, but it’s clear there is a general atmosphere in which we can see that tax increases are likely in all countries. If you consider the change in administration in the U.S., or what Brexit will mean in the U.K., as well as countries like Brazil and Mexico, then we should expect some kind of change, though whether it will come in 2021 or 2022 will depend on the country.
In Spain, I think we will see an attempt to increase revenue, and some of the measures that have been proposed, such as increasing the rate on dividends, could affect us. There isn’t much way to avoid that, so, whether we consider it fair or not, or whether we have arguments about regulation that we believe should be taken into account, it’s beside the point. As things are in terms of proposals, it will affect us.
We will have to see if Spain’s “Google Tax” (a tax on digital services passed last year which took effect in January) will affect us or not. These are all changes aimed at increasing revenue. And as a multinational company that has been blessed with good results, we are a target when it comes time to increase revenue.
It will be important to see how the approach of tax authorities affects the revenue question, whether they will be more aggressive or not in terms of audits and inspections. And if this will perhaps slow the series of initiatives we have seen recently in several countries including Spain, wherein tax authorities have tried to pursue a more collaborative approach with major taxpayers by trying to increase transparency and collaboration. We will have to see if this revenue pressure halts this approach or reinforces it.
Bloomberg Tax: What would you like to see in terms of new environmental taxes and initiatives to promote energy transition?
Our view on this is clear and is something we have been arguing for for many years. In regard to tax, we have always defended the principle of ‘Who pollutes, pays,’ and that, in the counter case, those who don’t, shouldn’t pay. Or at least they don’t have to subsidize those who do. From this point of view, we promote an environmental tax system that taxes that which has a significant impact on the environment, but also that we avoid double, triple or even quadruple taxation. In that sense, we need to see what happens at the EU level and how global solutions to green taxes develop and how that transfers to Spain.
In Spain, we have had a political landscape that has seen a proliferation of taxes in this field at the regional level. In many cases, these taxes have been blocked or even rejected by courts as unconstitutional, meaning they have to be rewritten. There were taxes that didn’t have a clearly defined taxable moment, taxes that duplicated others at a national level, etc. I think that it’s important to have clarity here: environmental taxes that are well defined, rather than a flood of different taxes at the European, national, regional and municipal levels. The same taxable moment should be taxed only once and at the appropriate level.
Bloomberg Tax: Finally, are you reading anything interesting at the moment, professional or otherwise?
Migoya: I don’t read around work more than emails and papers. I have plenty of books on the table and others I’ve bought. I’m reading the most recent Ken Follet book, though I’m making pretty slow progress. I still seem to be buying plenty of books—I’m just struggling to read them!
This interview was conducted in Spanish.