The wealth tax designed by the Executive to compensate for the elimination of wealth in some communities such as Madrid or Andalusia is on track to be extended beyond next year. On Friday, the Government detailed to Brussels in the Stability Program that the Temporary Solidarity Tax for Great Fortunes that will be charged this year and next can be maintained. It is something that is recorded from the first moment in the law but the Government has wanted to emphasize it in the document sent to the EU where the roadmap on income and expenses for the period 2023-2026 is shown. The text indicates the existence of a review clause to carry out "an evaluation of its results at the end of its validity and assess its maintenance or suppression".
With this new tax figure plus other measures, the Executive of Pedro Sánchez hopes to increase the tax burden by almost two points until 2026. Last year taxes plus social contributions represented 38.7% of GDP, which is equivalent to 514,045 millions of euros. In 2026 it would be 40.6%. The way to increase this pressure is by creating new taxes such as wealth, increasing the current ones or obtaining more collection, for example, with greater prosecution of tax fraud or the emergence of the underground economy.
Despite the rise in tax pressure to the aforementioned 40.6%, this will be below the 41.1% in which the percentage was located in 2021 for the whole of the EU, according to Eurostat data. Looking back, in a decade the tax burden in Spain will have grown by almost 7 points.
The greatest 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 contributions, the rise is from 13.6% to 14%. The most notable increase is this year coinciding with the approved increase in prices.
A part of the increase in collection expected for the coming years is based on what the Government calls "change in behavior of agents" and that reflects an outcrop of the underground economy due to various factors. And he specifically cites three in the Stability Program. In addition to the fight against fraud, he points out 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 purchases online.
The Program does not calculate the impact that the different appeals presented against the tax on large fortunes and that have already been admitted for processing could have on the evolution of collection. Taxes on energy companies and banks will also be appealed by those affected.
In relation to the tax that brings the most collection – the IRPF –, the Government estimates that in the coming years the growth registered in 2022 will slow down, which was mainly supported by the improvement in wages and the increase in the number of employed persons.
Collection data for the first quarter were also published on Friday, confirming that the rise in personal income tax continues to rise sharply. Between 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 salary update and the consequent increase in the effective rate are the main causes" of the rise. When wages rise, the tax rate increases. That is why there were a number of autonomous communities that deflated their rate this year to neutralize that effect. In the collection of the first three months of the year, this deflation is not appreciated because the withholdings that companies apply to 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 results in the text sent to Brussels. In the section dedicated to the taxation of the Autonomous Communities of Spain, the report highlights that "tax reductions in the Personal Income Tax are expected to materialize, both due to the deflation of tariffs and to reductions in rates in the different sections”. There are other communities, as is the case of Catalonia, which have not foreseen corrective measures to the increase in taxation derived from the rise in wages to offset inflation.
