Next year, Catalonia will cease to be the autonomous community where taxpayers with the lowest income pay the highest personal income tax in all of Spain after the tax reduction finalized by the Government of Pere Aragonès. The proposal designed by the Department of Economy headed by Natàlia Mas is to lower the regional scale rate in the first tax bracket 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 those citizens with an income of 33,000 euros or less per year. That is equivalent to 73% of the total taxpayers: about 2.6 million.
For the rest, the measure will have a neutral impact since the taxation in other sections will be adjusted upwards slightly (a few tenths) so that those who earn more than 33,000 euros do not represent any impact and continue paying the same as until now.
Another of the measures proposed by the Mas department is to reduce the number of personal income tax tax brackets from the current new ones to eight. This change aims to make the limits between brackets greater and thus prevent a salary increase to compensate for the runaway inflation of recent months from causing some taxpayer to end up paying a higher rate than until now. An increase in income can sometimes lead to a step jump by receiving a higher salary to compensate for inflation.
The personal income tax has two scales. A state tax that taxes 50% of income with rates that are the same for all of Spain and set by the central government. And a regional scale that taxes the other 50% with the sections defined by each regional government. It is this second scale that the Generalitat wants to reduce in its first section. In the case of a taxpayer with income of 24,900 euros, half of these will be taxed at 9.5% on the state scale and the other half, who previously were taxed at 10.5% as determined by the Generalitat, will now also do so at 9. ,5%. The estimated savings for this taxpayer is 125 euros. The reduction compared to the regional section is almost 10%.
Although the amount is not very large in absolute value, what is significant is that the Catalan taxpayers with the lowest income will no longer be – as 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 – as can be seen in the attached graph – by Asturias, Valencia and the Balearic Islands. Then there is a group with the same type in which, in addition to Catalonia, there are Aragon, Cantabria, both Castiles and Murcia. In the rest, taxation will be lower than that of Catalonia.
With the changes promoted by the Generalitat, Catalonia will not be placed in the rest of the tax brackets as the community with a higher tax rate. It was an old demand by some groups such as employers.
The reduction will obviously have to be ratified in the law accompanying the 2024 budgets, so the Government will have to have sufficient support. For now the Generalitat has met with PSC, Comuns and the CUP without reaching any agreement. The PSC demands some gesture regarding compliance with some issues agreed upon in previous accounts such as the B-40 highway, the Hard Rock project or the El Prat airport.
What is certain is that the approval of the public accounts will not be before the beginning of the year. Even so, the sources consulted explain that the Generalitat wants the tax reduction to be in force retroactively from January 1.
Although taxpayers will not notice the reduction until next year when they file their income tax return. The withholding that companies practice on the payrolls of their employees on account of personal income tax is as if the state scale were applied throughout Spain on a regional scale.
The reduction of the tax pressure on medium and low incomes by the Generalitat is part of the commitment that the Government acquired after agreeing on the investiture agreements of Pedro Sánchez with the PSOE. In an interview, Councilor Mas declared that based on the “investiture agreement and the profits obtained” some fiscal measures would be proposed “to alleviate, to the extent possible, the pressures on the cost of living of families.” . In that same interview, the councilor refused to enter into a race to lower taxes because public services could suffer.
