The Government has stepped on the accelerator to solve one of the biggest economic problems that threaten Radio Television Española. After Congress overturned in July the decree-law with which it intended to protect the Corporation's accounts against Treasury claims for VAT, the Executive has taken a new step to carry out the same economic solution through a different means. This Tuesday, the Council of Ministers authorized the urgent administrative processing of the new royal decree that modifies the RTVE financing system. A rule that, unlike the previous one, does not need to be subject to a validation vote in Congress.
The agreement, included in the official reference of the Council of Ministers of October 13, confirms the progress of the operation advanced by EL MUNDO: the Executive intends to incorporate the VAT that RTVE cannot recover into the calculation of the cost of the public service so that it can be compensated by the State. A decision of enormous importance for a Corporation that has provisioned 941.2 million euros for tax contingencies related to this tax.
The approval of the urgent processing does not mean, however, that the decree has already entered into force. The Government has authorized to accelerate the administrative procedure for its final approval, which must occur subsequently and culminate with its publication in the Official State Gazette.
The decision also comes at a particularly significant moment. With the general elections scheduled for November 29, the Executive intends to complete the reform before taking office. This was conveyed by the president of RTVE, José Pablo López, to the union representatives during a meeting held last week. According to the subsequent statement from the unions, the management informed them that the Government would approve the decree to redefine the net cost of the public service and that there would also be a new contract-program prepared from the Framework Mandate that had expired since 2016 and that with almost all likelihood it will also be through a decree.
The difference with what happened just three months ago is fundamental. On June 16, the Council of Ministers approved a royal decree-law to modify Law 17/2006 on state-owned radio and television. The measure established that non-deductible taxes linked to the public service must be compensated by the State. However, on July 14, Congress rejected its validation, with 178 votes against and 172 in favor, leaving the reform without effect.
Now the Executive has chosen to directly modify Royal Decree 1004/2010, which develops Law 8/2009 on RTVE financing. As it is an ordinary royal decree, its approval corresponds to the Council of Ministers and does not require subsequent parliamentary validation. The Government thus avoids a new vote like the one that frustrated its first initiative, although the legality and scope of the reform remain subject to the framework established by current laws.
The choice of this formula is especially relevant because the Ministry of Finance itself defended in June that regulatory action with the status of law was necessary to resolve the problem. The new project uses, instead, the regulatory authorization of Law 8/2009. Although the legal mechanisms are not identical, both seek to prevent non-recoverable VAT from ending up compromising the economic balance of RTVE.
A fiscal risk of 941 million euros
The origin of the problem dates back to the suppression of TVE's commercial advertising in 2010. Since then, RTVE barely obtains income subject to VAT and its ability to deduct the tax it pays to suppliers and production companies has been limited. Discrepancies with the Tax Agency over what amounts can be recovered have led to numerous administrative and judicial proceedings.
The consequence is that RTVE may be forced to assume very high amounts for taxes corresponding to previous years. According to the financial report cited in the project documentation, the Corporation has registered a provision of 941.2 million euros for tax contingencies related to VAT.
This figure does not mean that the Treasury has definitively claimed all that money nor that the State is going to transfer it immediately. It reflects the dimension of the economic risk that RTVE faces and that the Government intends to address through the new compensation system.
The project establishes that taxes borne by the Corporation that cannot be deducted, recovered or compensated will form part of the cost of the public service. The provision also covers amounts from previous years whose existence or amount is subsequently determined by administrative criteria or judicial resolutions.
In practice, if a ruling forces RTVE to assume VAT that it had considered deductible, that amount may be incorporated into the net cost of the public service and be compensated with state funds. The tax obligation is not canceled nor does the debt to the Treasury disappear: a mechanism is established so that its impact can be covered through public financing of the Corporation.
The Government maintains that the reform provides legal certainty and allows the costs associated with the provision of the public audiovisual service to be correctly identified. The project also establishes that compensation may not give rise to financing greater than the net costs that are legally required to be covered.
Regional television stations are left out of the reform
But the Government's decision has another relevant consequence: the solution it is preparing is designed specifically for RTVE and does not extend to regional public television stations, despite the fact that several of them maintain similar conflicts with the Tax Agency.
The case of Telemadrid is especially illustrative. This year, the National Court issued a ruling that forces Madrid's public television to face 17 million euros for discrepancies related to VAT deductions between 2012 and 2014. The conflict responds to the limitations established to differentiate commercial activity from the public service obligations of public broadcasters.
This is not, therefore, a problem exclusive to RTVE. The regional chains have also appealed tax assessments and questioned the criteria applied by the Treasury. However, the project promoted by the central Government exclusively modifies the financing regulations of the State Corporation.
The difference is significant. While the central Executive prepares a specific way to incorporate RTVE's fiscal contingencies into the calculation of its public financing, regional radio and television stations will have to face their respective conflicts within their own legal and budgetary frameworks.
The urgency authorized by the Council of Ministers reinforces the intention to complete the procedure before the Government takes office. The Government Law allows certain administrative deadlines to be shortened when the urgent processing of a regulatory initiative is agreed, although this circumstance does not eliminate the legal requirements or automatically convert the project into an approved standard.
The operation also has a second aspect. According to the union communication, RTVE management also hopes to have a new contract-program before the Executive takes office. This instrument must specify the public service obligations of the Corporation, its objectives and the economic resources destined to finance them.
If both initiatives are completed in the announced terms, RTVE would face the next political stage with a new definition of the fiscal costs that can be compensated by the State and with an updated framework of commitments and financing.
For now, the agreement of the Council of Ministers represents a decisive advance in the process. After Congress rejected the first formula in July, the Government has activated a second way to address the RTVE VAT problem. This time, urgently and without the need to submit the decree again to a parliamentary validation vote.
