The wealth tax designed by the Spanish Executive to compensate for the elimination of the wealth tax in some communities, such as Madrid or Andalusia, is on track to be extended beyond next year. On Friday, the Central Government detailed in Brussels in the Stability Program that the temporary solidarity tax on the great fortunes that will be collected this year and next year could be maintained. It is something that has been in the law since the beginning, but the Central Government has wanted to highlight it in the document sent to the EU showing the road map on income and expenditure for the period 2023-2026. The text points out the existence of a review clause to make “an evaluation of its results at the end of its validity and assess its maintenance or deletion”.
With this new tax figure, plus other measures, the Executive of Pedro Sánchez hopes to increase the fiscal pressure by almost two points until 2026. Last year taxes plus social contributions represented 38.7% of GDP, which which is equivalent to 514,045 million euros. In 2026 it would be 40.6%. The way to increase the pressure is to create new taxes such as the wealth tax, increase the current ones or achieve more revenue, for example, with a greater persecution of tax fraud or the surfacing of the shadow economy.
Despite the rise in fiscal pressure to this 40.6%, it will be below the 41.1% in which the percentage was in 2021 for the EU as a whole, according to Eurostat data. If you look back, in a decade the fiscal pressure in Spain will have grown by almost seven points.
The most important increase in the coming years – as foreseen in the program sent to Brussels – will be in taxes, since they will go from representing 24.9% of GDP to 26.5%. In the case of quotes, the rise is from 13.6% to 14%. The biggest increase is this year, coinciding with the approved increase in contributions.
Part of the increase in collection expected for the coming years is based on what the Government calls “change in the behavior of agents” and which reflects an upturn in the submerged economy due to several factors. And he cites three specifically in the Stability Program. In addition to the fight against fraud, he points to the “change in tax awareness as a result of the covid crisis” and “the growth of card payments compared to cash payments” due to the limitation of the use of cash and online shopping.
The program does not calculate the impact that the different resources presented against the tax on large fortunes could have on the evolution of collection and that have already been accepted for processing. Taxes on energy companies and banking will also be appealed by the injured parties.
With regard to the tax that brings in the most revenue – personal income tax –, the central government estimates that in the coming years the growth recorded in 2022 will slow down, which was fundamentally based on the improvement of wages and the increase in busy
On Friday, the collection data for the first quarter were also published, in which it is confirmed that the increase in personal income tax continues to rise strongly. In the first three months of the year, income tax collection increased by 11.7%. The Tax Agency itself pointed out on Friday that “the greater increase in the wage bill as a result of the wage update and the consequent increase in the effective rate are the main causes” of the increase. When wages rise, the tax rate rises. That is why there were a number of autonomous communities that deflated their rate this year to neutralize this effect. In the collection of the first three months of the year, this deflation is not appreciated because the withholdings practiced by companies on workers are the same throughout Spain (the state rate multiplied by two).
Yes, this regional deflation will be appreciated in the final collection, as it appears in the text sent to Brussels. In the section dedicated to the taxation of the autonomous communities of Spain, the report highlights that “the materialization of tax reductions in personal income tax is expected, both due to the deflation of rates and rate reductions in the different sections”. There are other communities, as in the case of Catalonia, which have not foreseen corrective measures to the increase in taxation resulting from the rise in wages to compensate for inflation.
