Hilario Alfaro: "Outside Madrid there is a tax hell"

Hilario Alfaro, businessman and president of Madrid Foro Empresarial, has visited the microphones of the Atalayar programme on Capital Radio, where he assessed the opportunities available to Madrid companies in the United States, according to IMF economic growth data, thanks to the arrival of the Biden Administration. Alfaro also stressed that the political class in our country must be more far-sighted. We are at a time when we have to join forces, all pull in the same direction and come up with measures that benefit the economy, said the president of Madrid Business Forum. 

Born in Madrid in 1957, Hilario Alfaro belongs to the third generation of a family that has been dedicated to the textile trade for almost a century and, since 1980, he has been the general manager of ALFARO 1926, the family business that stands out for the manufacture of made-to-measure leather garments. Alfaro is a strong advocate of business associations. In 2002, together with other businessmen, he founded the Madrid Confederation of Commerce (COCEM), an organisation he chaired until 2014. For eight years (1998-2006), he headed the Asociación Empresarial de Comercio Textil (ACOTEX), an organisation of which he is currently the honorary president. He is currently the president of the project that was born in 2015, Madrid Foro Empresarial, a meeting point for the business community from where to develop and promote the "network capital", the expansion and growth of entrepreneurs and companies in Madrid, through contact, exchange of experiences, cooperation and collaboration. 

During the period when Trump was in power, we did not do well in terms of business convenience, and now new opportunities are opening up, or did we not do so badly with Trump, tariffs aside?

We could have done better and we did not. We are going to look forward. A fortnight ago we had a conference with Iberdrola and Ferrovial, which are Spanish companies that are well established in the United States and have the will to stay there, together with Antonio Camuñas, who was president of the Spanish-American Chamber of Commerce, and the truth is that a window of optimism opened up; we need many windows at the moment and one of them is the new Biden Administration. He has the will to normalise relations with Europe, not to mention Spain; he will have called 60 presidents of the governments of other countries. In any case, he does have the will to normalise relations with Europe because, before Biden arrived, the summary was the United States and Europe. Since the pandemic, a completely different scenario has opened up and the future lies with the United States-China, and Europe can either act as a hinge or we will end up as a theme park. Of course, now, the powers are China and the United States, Europe has moved to a third tier.

There was a European Council three weeks ago, where for the first time, in a virtual way, the President of the United States participated in a Council of the European Union, and he consolidated his will for Europe to be with him in what is being built. It is a very clear block to stop China, but the fact is that in January the European Union signed a trade agreement with China, so it is complicated to fit these pieces together. It is true that, once the problem of the tariffs caused by the aid to Airbus in Europe on the one hand, but also to Boeing on the American side, the olive growers and farmers who have suffered losses of almost 7 billion euros due to the tariffs imposed by the United States on wine, cheese, oil, etc., has been overcome. Iberdrola and Ferrovial are very clear about how to do business in the United States.

In addition, they have the will to stay in business. Ferrovial's focus in the United States is on all transport infrastructure operations. They are talking about a stimulus plan of 1.9 trillion dollars and practically all investment is in infrastructures. Iberdrola is the third largest renewables operator in the US and serves more than 10 million Americans. So that's more than olives. We have large companies that are committed to the United States and I believe that Biden's rules of the game are going to be very good for these companies.

Beyond the "Trumpist" policy of always prioritising domestic production over imports of products, as the former president of the United States has been doing for four years. The change in US trade policy must undoubtedly benefit Europe, and Spain is a very important part of Europe and Madrid is an important part of Spain.

I believe that Spain's entire foreign policy should be studied at this time. With the Brexit issue, the fact that Spain does not have an ambassador in the United Kingdom, diplomacy also plays an important role in the establishment of companies abroad. And I am asked who is Spain's best ambassador? Well, I would say that the King Emeritus is the best ambassador Spanish companies have ever had. I would also say it without any complex. Now, who do we have? I don't know. In the hottest cases, such as Brexit or the issue of the United States, it turns out that the ambassadors have failed, I mean the ambassadors of the United States here, not the one here in the United States.

In terms of business issues, how do you see tourism this summer in the Madrid region? Businessmen in Madrid have perhaps had a little more freedom than the rest due to the policy followed by the Autonomous Community of Madrid. But on a national level, what season is expected?

Well, tourism will recover depending on the degree of vaccination that we are able to achieve. From there, there may be some recovery depending on what percentage of vaccination we reach in June and July, bearing in mind that these are short-term trips, which can be organised in three days; the long-haul tourists are not going to come this summer, for sure. And I think they will start to appear at the end of the year if we do our homework fairly well.

So we have to go for the lesser of two evils.

This season will be very similar to last year. Maybe with a little more European tourism, but not much more. I don't think the Mexicans, Russians, Emiratis, Brazilians or Americans will be here before the end of the year. At the end of the day, this is the kind of tourism that invests and spends in the city or the country. European tourism is more about sun and beach, so Madrid does worse there. It is possible that domestic tourism will do its best to maintain itself, but, in any case, both the local and regional administrations, and in this case the Community of Madrid has the responsibility for tourism, have to change the rules that have been in place until now. What worked for us until COVID does not work for us post-COVID, starting with the volume of investment that is being made to sell the Madrid brand, the Madrid brand outside Spain in long-haul places.

We recently had Gerardo Seeliger, president of Madrid Open City, which is one of the initiatives that seeks precisely this, to sell Madrid outside Spain.

They are trying to attract foreign investment to Madrid. I think we have to reinvent ourselves here and reinventing ourselves with the same sources of information is going to be very difficult. We need to introduce freshness to the administration, to take risks, which often do not want to take any risk. To do more of the same, I tell you that in the post-COVID era, what we did before will not work for us again.

Is Madrid attractive for a foreign investor or is it no longer attractive? I am asking if we have the legal security that we should have. 

In Calle Mayor there is a shop of a well-known sports brand whose windows were smashed and ransacked, and next door there is a bookshop that they didn't even touch. That said, as far as legal certainty is concerned, I think Spain has always had legal certainty. Lately it has been called into question and there have been some worrying cases, or cases to start worrying about, but 80% of the investment that comes to Spain comes to Madrid, so Madrid is still attractive. 50% of all the jobs that have been created between March 2020 and 2021 have been in Madrid. So, it must be for a reason. And Madrid is not a tax haven. What happens is that the rest of the communities are possibly a tax hell. I don't know why they have to put all 17 of us in the same hell. We are going to help the others out of that hell. 

Well, precisely on the day that the Government announced that on 1 January next year, it intends to put an end to the privileges of Madrid, the tax advantages, inheritance tax, etc.

They have ended the election campaign, they have done themselves a disservice. The same thing happened in the previous elections, that because of the tax issue they didn't come out and this time with almost a month to go or 20 days of campaigning, they repeat the same action. Today they have buried their chances.

The mistake does not seem to me to be saying it in an election campaign, the mistake is that they are going to do something like this, but that there is a tax increase.

Madrid is not a tax haven. The problem is that the other autonomous communities are a tax hell. In Madrid, what is being done is to subsidise taxes that in other autonomous communities have to be paid and that, for example, in the case of inheritance, means that it is better not to inherit than to inherit. And that is a real disgrace for a country. 

There are 15 countries in the European Union that do not have inheritance tax, but Extremadura has it as low as Madrid and this is never mentioned. In Cantabria there is no inheritance tax and it seems that only Madrid exists. 

There has even been talk of fiscal dumping in the Community of Madrid.

And they talk about raising taxes in a country with a 24% underground economy. And that is where the great unresolved issue lies. It is not about raising taxes on those who already pay them, but about finding out where that 24% is. The average in Europe is 12%.
 

Harmonise those who pay less, not those who pay more?

If we want to catch up with Europe, let's look for the 12 points difference. That is where we have to make an effort.

Last week we saw that in Spain the unemployment figures predicted by the IMF are higher than the unemployment figures for Greece, a country with which we are always in rivalry when it comes to unemployment. But even so, we see how the government insists that there is going to be growth, a very important rebound in the Spanish economy. Do businessmen also foresee this?

There are two factors that are going to change everything: how the vaccination process progresses and the arrival of European funds. Now we are in elections in the Community of Madrid, which I think is what we least needed because all that delays. But due to a series of circumstances we are here. But then, after the elections, we will say that summer is upon us.

Let's see what happens in Catalonia, lest we have to repeat the elections. Puigdemont is managing it from Brussels. 

And let's hope that there are no general elections in the last quarter of the year, which is another possibility. And every day there is more and more talk of this possibility. In this context it is very difficult to draw up the papers that need to be presented to Brussels and for the money to arrive. Elections, summer, return, elections, I don't know what. You need someone who thinks big for the general good, not for the employers. Behind the employers are the workers or after the workers are the employers, call it whatever you want, I don't care what order you want, but we are at six million unemployed and I think we could reach 7 million.

The barometer of ATA, the Association of Self-Employed Workers, showed that 120,000 self-employed workers are not going to open, they are going to go directly to unemployment.

We have to work here, to move this forward and bring in the European funds. If they grant it and trust us, we have to tackle the drama of unemployment. Because we could reach seven million and a country with seven million unemployed is a drama. We have always talked during the pandemic that this is a health crisis, but then comes the economic crisis and then comes the social crisis, and the social crisis is very dangerous.

How could small and medium-sized entrepreneurs, the self-employed, do to be eligible for 200,000 or 300,000 euros of these 140,000 million European funds? 

Adding it up, we make up 95% of the business fabric in Spain and I don't think we are going to get it. The possibility of capillarity that these funds are going to have and how difficult it is to present these projects, the SMEs do not have the possibility to do so. We have to rely on the usual four big companies and the multinationals, which will be the ones to distribute the funds, and maybe something will come to us. I don't think we're going to get it, honestly, and we're going to have to keep chipping away at it as we've done all our lives. 

Unless you get attached to a big project, a big company, and your SME is going to fit in somehow.

We are in a country in which the State owes 80 billion, which is the default platform, which would relieve many small businesses. The Late Payment Act is published and it is the only law that has been published that does not have a sanctioning regime. A law is meant to be complied with and if you don't comply with it, you end up with a penalty regime. The only law in Spain that does not have a sanctioning regime is the Law on Dilatoriness. And a government of one colour, of another colour, of another colour has passed. In other words, it is big business that rules the government, it is the other way round, they are in cahoots and they will pay us when the administration wants them to.

In Brussels they are interested in this money arriving because we are talking about a single market and this also favours them so that the Spanish consumer has employment, purchasing power and buys products from Holland, Sweden, Finland or Germany, etcetera. But what they are not going to do is to give away those 140,000 million for the political interests of one or the other, so that nobody can explain themselves afterwards. Things could be done better.

But the political class at the moment does not have the vision that we need. We need to join forces, all pull in the same direction and if we are not capable of inventing measures that benefit the economy, copy what is working in other places. There are countries that have lowered VAT, here it has been impossible, to lower VAT on tourism from 10% to 7% or general VAT from 21% to 19%. The social contributions, the corporate tax that they say we have to pay now, we are going to pay it when in other countries if your turnover in 2020 has fallen in the first half of the year by 40%, which were the months in which we were closed, you don't pay VAT that year. Here we are going to pay it religiously. We haven't touched the lease payments for the premises, the tax debts. The Netherlands has gone on a tax holiday, which they call it, tax debts are taxed at 0.01%, here we are at 3.75%. All that helps a company. Hey, if I can't pay tax, I pay zero point zero one. Sure, that gives you some oxygen.