The country is one of five in the OECD with the worst tax competitiveness, according to a report prepared by the Tax Foundation and the IEE
In an exercise of record revenues for the state treasury due to the effect of inflation on certain taxes, such as VAT or personal income tax, Spain was among the five OECD countries with a less competitive tax system, falling from 23rd place in 2019 to the current 34, according to the Tax Competitiveness Index compiled by the IEE and the Tax Foundation. Moreover, one of the most important conclusions is that the tax expenditure of Spanish households and companies is already 52.8% higher than that of European taxpayers on average.
This fiscal effort represents the relationship between the fiscal burden and the GDP per capita of each country. Income within a country is taken into account in this way, as it is not the same to pay a given amount of taxes at one level of income as at another, assuming a greater sacrifice (for equal tax paid) for those countries with lower income levels,” they explain from the IEE.
“None of the major advanced economies has a greater fiscal effort than ours,” explains Gregorio Izquierdo, general manager of the IEE.
According to him, one of the major problems of the Spanish tax system is the high corporate tax burden. In concrete terms, companies already contribute 32.5% to total government revenue, compared to an average of 23.9% in the OECD.
From the CEOE think tank, they recall that “we are one of the countries with the most taxes on dividends, we have increased the installment payments and the general contribution rate and also the maximum base.”
If only corporate income tax is taken into account, the regulatory tax burden exceeds the European Union average at 23.7%, according to Eurostat data. «There has been a deterioration compared to the results of 2020, where Spain showed a corporate tax regulatory burden 22.1% higher than that of the European Union and even more since that of 2019 in which the difference was 16% , Spain’s relative situation is deteriorating and we have moved from position 22 out of 36 countries analyzed in 2019, in terms of the competitiveness of its corporate taxation, to position 32 out of 38,” they recalled in the IEE.
As for the tax on wealth and high incomes, these are also above average at 40.8%. In fact, only Italy surpasses us in this ranking.
From the IEE they add that, in terms of personal income tax, “we should point out that it is 8.8% above the EU average and 7.6% above the OECD average, in addition, the aggregate effect with social security contributions, which are particularly high in Spain, the tax wedge will increase to 40% in 2021, which means that the net salary that the employee will ultimately receive will account for 60% of the wage costs.
So, and regarding the tax wedge (measuring the difference between what the consumer pays and what the producer receives, this difference is owned by the state through taxes), Spain’s 40% is clearly above average. that is 35%.
According to the indicator, Spain is one of the countries where personal income tax is also more progressive. Notably in ninth place out of a total of 22 analysed. «Our country exceeds the EU average in income tax progressivity and ranks on the OECD average, with a value of 112.75, compared to the OECD average of 112.86 and the EU average of 100. According to this indicator, income tax in Spain is therefore 12.75% more progressive than the EU average,” the experts say.
Looking ahead to 2023, a year when some low-income or SME tax cuts come into effect, with inflation also more subdued, there is every indication that the data will improve. However, Izquierdo thinks Spain will continue to lose positions in terms of tax burden. “We estimate that it will be 42.3% this year, higher than that of 2022. These are very high and worrying levels,” he emphasizes.
Source: La Verdad
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
