Next year, Catalonia will cease to be the autonomous community where taxpayers with the lowest incomes pay the highest personal income tax in all of Spain after the tax reduction completed by the Government of Pere Aragonès. The proposal designed by the Ministry of Economy led by Natàlia Mas is to cut the rate of the regional scale in the first section of taxation by one point: from the current 10.5% to 9.5%, according to sources consulted.
This modification that appears in the law accompanying the budgets prepared by the Government will affect almost three out of every four taxpayers. The beneficiaries will be all citizens with an income of 33,000 euros or less per year. This is equivalent to 73% of the total taxpayers: around 2.6 million.
For the rest, the measure will have a neutral impact, as the taxation in other sections will be adjusted upwards slightly (a few tenths), so that those who earn more than 33,000 euros will not have any impact and will continue to pay the same than so far
Another of the measures proposed by the Mas ministry is to reduce the number of income tax brackets from the current nine to eight. With this change, the aim is to make the limits between sections larger and thus avoid that a salary increase to compensate for the runaway inflation of recent months could cause some taxpayer to end up paying a higher rate than until now. An increase in income can sometimes lead to a step jump, as a higher salary is received to compensate for inflation.
The IRPF has two scales. A state tax that taxes 50% of income with rates that are the same for all of Spain and that is set by the central government. And an autonomous scale that taxes the other 50% with the sections defined by each autonomous government. It is this second scale that the Generalitat wants to lower in the first section. In the case of a taxpayer with an income of 24,900 euros, half will be taxed at 9.5% according to the state scale and the other half that was previously taxed at 10.5% as determined by the Generalitat, will now also be taxed to 9.5%. The estimated savings for this taxpayer is 125 euros. The reduction compared to the autonomous section is almost 10%.
Although the amount is not very high in absolute value, the most significant thing is that Catalan taxpayers with lower incomes will no longer be – as they have been until now – the ones who pay the most among the common regime communities, excluding the regional ones of Navarre and the Basque Country. The highest taxation ranking in personal income tax is headed by – as can be seen in the attached graph – Asturias, Valencia and the Balearic Islands. Then there is a group with the same type in which, in addition to Catalonia, there is Aragon, Cantabria, the two Castiles and Murcia. In the rest, taxation will be lower than in Catalonia.
With the changes promoted by the Generalitat, Catalonia will also not be placed in the rest of the tax brackets such as autonomy with a higher rate of taxation. It was an old claim by some groups such as employers.
The reduction will obviously have to be ratified in the accompanying law for the 2024 budgets, so the Government will have to have enough support. For now, the Generalitat has met with the PSC, the Commons and the CUP and has not reached any agreement. The PSC demands some gesture regarding compliance with some issues agreed in the previous accounts, such as the B-40 motorway, the Hard Rock project or El Prat airport.
What is certain is that the approval of the public accounts will not be before the beginning of the year. However, the sources consulted explain that the Generalitat wants the tax reduction to be in effect retroactively from January 1.
Although taxpayers will not notice the reduction until next year when they file their income tax return. The retention practiced by companies on the payrolls of their employees on account of personal income tax is as if the state scale were applied to the autonomous scale throughout Spain.
The reduction of fiscal pressure on middle and low incomes by the Generalitat is part of the commitment acquired by the Government after agreeing the investiture agreements of Pedro Sánchez with the PSOE. In an interview, Minister Mas declared that based on the “investment agreement and the profits obtained” some fiscal measures would be proposed “to relieve, as far as possible, the pressures on the cost of living of the families”. In that same interview, the councilor refused to enter a race to lower taxes, because public services could suffer.