With each passing year, the number of high-income taxpayers living in Madrid increases. They are already 65.5%. It is not possible to know if it is due to the greater dynamism of the economic activity of the capital or due to relocations from other communities. But that downward tax competition contributes is a fact revealed by different studies.
All taxpayers with very high wealth (more than 30 million euros) must file the wealth tax return. What happens is that in Madrid, being subsidized at 100%, those affected by this tribute do not pay anything. But statistically there is a record of these citizens, and it can be inferred that those who do not pay assets despite being likely to do so are residents of Madrid, since it is highly unlikely that someone with assets of 30 million would be exempt from paying taxes via bonuses.
Based on this premise, the figures from the Tax Agency indicate that in 2011 there were 173 taxpayers with assets greater than 30 million who paid the tax. In 2020 there were 250, 44% more. In contrast, taxpayers with more than 30 million who were exempt from paying the tax (residents in Madrid) grew three times more in the same period. Specifically, 164%, going from 179 to 474. And those 474 taxpayers residing in Madrid account for 65.5% of the total of the highest incomes in Spain.
The Director of Economy of Foment del Treball, Salvador Guillermo, maintains that the data show that the increase in the number of large taxpayers in Madrid can only be explained by the greater dynamism of the capital or by the arrival of new taxpayers.
An IEB-UB study confirms that in the five years after the abolition of the wealth tax, in 2010, the number of large taxpayers in Madrid grew by 6,000 people from other communities. The IVIE (Valencian Institute of Economic Research), which has extensively analyzed the fiscal structure of the State, warns in a report that "the tax reductions of the Community of Madrid have consequences for the rest of the communities". The IVIE economists add in the work, published in 2020, that “the tax bases that Madrid attracts reduce income”, especially from high-income clients. Using data from two years ago, the IVIE calculated that Madrid's tax cuts implied a decrease in public revenue of around 20%.
The differences come mainly from personal income tax, since the Madrid community is where the lowest rate is paid; of equity, because it is subsidized at 100%; and inheritance and donations, where taxation is very low. Now Andalusia follows in the footsteps of Madrid. The problem is that the tax bases of Andalusian taxpayers are not as high as those of the capital. The lower taxation of Madrid does not translate into a low collection, but it is higher than that of communities such as the Catalan one, with greater fiscal pressure. That is because, by having higher salaries, the quota that comes out to pay them is higher. And precisely the tax reductions are especially attractive for higher income taxpayers "encouraging their change of tax domicile" to the capital, according to the IVIE.
The different tax treatment depending on the community of residence is so great that it leads to multiplying by two the taxation in one autonomy with respect to the other. Crowe Legal y Tributaria has compared how much a taxpayer would pay with work compensation of 150,000 euros, an estate of two million and an inheritance received of half a million. Where I would pay a lower overall fee is in Madrid (57,243.48 euros). It is less than half of what you would have to pay if you were taxed in Valencia: 117,942.27 euros. And if you lived in Catalonia, you would pay a little less than in Valencia: 101,406.56 euros.
Crowe's calculations include the latest reductions announced by the governments of Isabel Díaz Ayuso in Madrid and Juanma Moreno Bonilla in Andalusia. This community continues to have a slightly higher fiscal pressure than that of Madrid, despite the 100% reduction in inheritance and donation tax. The key is the lowest rate in personal income tax that Madrid has maintained for years.
According to the estimates of REAF-General Council of Economists, the community where the highest wealth tax is paid is Aragón in the first place if it is a wealth of 800,000 euros. For higher amounts, Extremadura is the one with the highest rates.
In the case of personal income tax, Catalonia is the community where low-income taxpayers pay a higher tax. On the other side is Madrid. Any possible review of Catalonia's fiscal policy is framed in the negotiations of the Generalitat's budgets for next year. The commons, preferred partners to agree on the accounts, are against measures such as the deflation of income brackets, because they consider that it benefits higher incomes more than low ones. Regarding heritage, the Minister of Economy, Jaume Giró, said this week that the Generalitat could consider abolishing the tax if there were a change in the financing model that would provide more resources to the community.
