Madrid consolidates its first competitive position, followed by Vizcaya, Álava and Guipúzcoa
Bonuses, deflation, remarkable differences in the number and types of own taxes… the varied tax map of the autonomous communities in Spain once again highlights the competitive gap that has arisen between them and which, predictably, will continue to widen after the reforms that some regions have implemented in recent weeks.
In this scenario, Madrid is presented as the most competitive fiscal community, widening the gap with Catalonia by three-tenths to 2.86 points, taking the last position in the regional index prepared by the Foundation for the Advancement of Liberty and the Tax Foundation.
It should be borne in mind that the indicator does not yet include the reforms announced by several communities in recent weeks. In other words, the gap could be even wider in the next edition of the indicator, which is calculated based on the evolution of taxes such as inheritance and donations, heritage or the regional part of the personal income tax, together with the taxes of each region .
Madrid repeats in first place after abolishing its own taxes and cutting income tax by 0.5 points, while the worst situation in Catalonia increased income tax brackets.
As the authors of the report recall, the cause of the loss of fiscal competitiveness lies in Catalonia, despite the fact that they have reduced the minimum income tax rate by 1.5 points to 10.5%, “the number of brackets have raised and declared the personal minimum unconstitutional”, also has three times more regional taxes than the other communities.
Almost on the same level as Catalonia, the Valencian community is also in the lower part of the table, especially before one of the “most onerous” systems in inheritance, patrimonial transfers and documented legal acts.
At the top of the table, and only behind Madrid, are Vizcaya, Álava and Guipúzcoa, in second, third and fourth place respectively. «In the year 2022, the municipalities reduced the income tax rate and the personal and family minimums. In addition, due to high inflation, they have announced a new deflation of 4% of the rate that should have been in effect on September 1, the document said.
In fact, the experts believe that Guipúzcoa could improve its position if it raised the tax shield and wealth tax deductions to Vizcaya’s level, while lowering the tax rate.
In addition, they point out that the three municipalities could increase the bonus of the net income from employment and make it equal to that of the common system communities, “so that taxpayers with a gross income of 15,500 euros do not pay more than in the other communities. ”
As a novelty this year, the report compares Spanish communities with other European countries to show that national regions have higher than average tax rates in terms of income, wealth and succession.
With regard to income tax, all the Autonomous Communities and the three Basque provincial councils have maximum marginal tax rates higher than the average of the analyzed countries (42.94%). In addition, ten autonomous communities, the Valencian Community (54%), Navarra, La Rioja, the Canary Islands, Asturias, Cantabria, Catalonia, Aragon, the Balearic Islands and Extremadura, plus the three Basque provincial councils, have a higher maximum tax rate than Germany (47, 5%).
Madrid is the only community that has maintained a maximum tax rate of 45%, in line with other European countries such as Germany, the United Kingdom, Luxembourg, Switzerland, Norway, the countries of Eastern Europe or the Baltic States.
“Spain is also by far the country with the highest tax on heritage, a tax that has almost disappeared and is only enforced in Switzerland, at the cantonal level and in Norway,” the experts insist.
The Autonomous Communities take the first position in applying a maximum tax rate ranging from 3.75% in Extremadura to 1.88% in Galicia. They are followed by Norway at 1.1%, Switzerland at 0.702% and Madrid at 0%, due to the bonus that the Autonomous Community has been applying correctly for years.
From the Foundation, they believe that, in order to make the Autonomous Communities competitive at both regional and international level, “it is necessary not only to lower the maximum rate, but also to abolish or reduce 100% of the wealth tax, following the example of Germany, Sweden, Finland, Italy or neighboring France».
With regard to inheritance and gift taxes, once the multiplication coefficients for kinship and pre-existing assets have been applied, the maximum tax rate reaches 87.6%, the highest tax in all of Europe.
In addition, fifteen of the European countries that still enforce the tax have lower maximum tax rates than those of any Spanish Autonomous Community. The experts believe that, given the reduced collection capacity (0.58% of total tax collection) and the negative impact the tax has on business, savings and employment, “the
policy makers they should consider its complete repeal, as Sweden did almost two decades ago”.
Source: La Verdad
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
