It does not mean that in Spain the effect of the State in the redistribution of wealth does not reduce inequality. Gets it. What happens is that this reduction is less intense than that achieved by the public administrations of the other EU countries.
The public sector in Spain reduces inequality in society less than that of most of the countries of the European Union. That is at least what happened until 2018, according to a report by the Fundació La Caixa. In any case, and although the researchers have not been able to work with the most recent data, they consider that a historical trend has not changed.
Why is the State in Spain less efficient than in other countries to combat inequality? Fundamentally due to low tax collection and a less progressive tax system. That little is collected does not mean that taxes should be raised, but rather that more money must be brought into public finances, reflects Jorge Onrubia, professor at the Complutense University of Madrid and researcher at Fedea. Together with his colleague at Fedea and professor at the University of Zaragoza Julio López Laborda, and the professor at the Rey Juan Carlos María del Carmen Rodado University, they warn in a report by Fundació La Caixa that "the correction of inequality that is achieved in Spain with taxes it is lower than the EU average”. In fact, a study by the UB–IEB professors José María Durán and Alejandro Estelle confirms in the same report –as can be seen in the graph– that inequality in Spain before taxes is at the average for the Union European Union (EU), but on the other hand "the inequality of the final income after the performance of the public sector tends to be one of the highest".
Onrubia believes that the low collection is also explained because in the Spanish system "we have many fiscal holes". The Complutense professor refers to deductions, allowances or other mechanisms that reduce public income.
In another paper in the same Fundació La Caixa report, Sara Torregrosa, a professor at Lund University, emphasizes that “tax fraud is an automatic generator of inequality between those who pay what they have to pay and those who don't”. The economist reminds her that in Spain there are tax figures, such as the self-employed module system, which are legal but actually contribute to paying less taxes than they should.
In the work it is highlighted that the highest incomes are the ones that commit the most fraud. "It's because of a composition effect," he clarifies. In the income of the richest, the part that comes from financial benefits is greater and studies show that fraud is higher there. "Tax compliance is lower the higher we go up the income scale," says the report.
Torregrosa does not believe that the trend has changed too much during the years of the pandemic because the underlying trends do not change so quickly, although he makes it clear that without the specific figures it is difficult to analyze it. In this sense, the professor reflects that in times of crisis tax fraud can also increase due to the difficulty of making payments to the Treasury.
Onrubia adds another idea: "we think that vulnerable households will have lost income" during the covid crisis. In relation to the use of ERTEs (temporary employment regulation files), the economist believes that what they will have fundamentally done is “cushion the loss of income” in the hardest moments.
In the report of the Fundació La Caixa it is reported that in 2017 the fiscal pressure of Spain was five points below the average of the European Union and 6.3 points of that of the euro zone. With figures from 2019, the last year with definitive data, in Spain the tax burden is equivalent to 34.8% of GDP, while the respective averages of the European Union and the euro zone rise to 39.1% and 40.5 % of GDP respectively. This means that if Spain equalized its fiscal pressure with the average of the European Union or the euro zone, the collection would increase, approximately, between 54,000 and 71,000 million euros.
