The Spanish have worked until today to pay taxes. This year, citizens have dedicated, on average, a total of 193 rental days to comply with their obligations to the Treasury. In other words, Fiscal Liberation Day, which Fundación Civismo calculates annually, arrived on July 13. This day is delayed with respect to the 2020 date, which was placed on June 26.
Civismo analysts stress that the delay is due to the fact that, on the one hand, in 2021 not only salary income is included, but also professional income and savings. On the other hand, they highlight a set of taxes that until now the models that were used did not collect correctly, in addition to the new taxes approved in 2021 and the tax modifications of those already existing both in the State and in the autonomous communities. In this way, the stable or downward trend of recent years is broken.
“Spanish families pay proportionally more taxes than what they earn,” says Javier Santacruz, author of the report
In the last year, in percentage terms, despite the fact that their incomes have decreased by 7.34% in the same period (first quarter of 2021 compared to the first quarter of 2020) and the payment of total gross taxes has remained unchanged. Since the first quarter of 2019 -when the 22.3% increase in the minimum interprofessional wage came into force-, the accumulated drop in family income is 5.95% while the payment of taxes has increased by 5.34 % in the same period.
Despite the reduction in family income, . In addition, as the latest data for the first quarter of 2021 shows, there is a high probability that they will continue to rise in the coming quarters, due to the fact that tax obligations are rising faster than families’ ability to pay.
Taxes rise in the last 22 years above what income does
Although it has been accentuated in the last two years, it is not a phenomenon exclusively of the present. In the last two decades (starting from the data from the fourth quarter of 1999), the payment of total taxes by families has increased in cumulative annual terms by an average of 3.79%, while, in the same period, the The sum of income from work and income from capital have risen annually by an average of 2.84%.
Taxes have risen in the last 22 years above what rents have risen. An average Spanish family today pays 10 points more in taxes than at the end of the 20th century. The complete economic cycle starts from 1999-2000. For this reason, the 10-point tax increase is of a structural nature, that is, it is extremely difficult to reverse this situation. The Civismo report observes “a growing fiscal pressure on families.” In his opinion, the lowest incomes -as can be seen from the Covid crisis- will have to assume a higher level of taxes as anticipated by the moving average of the first four-month period of 2021.
Civismo calculates that the increase in debt will force families to pay the Treasury an additional 365.52 euros each year
The direct effect of an increase in total debt of 1,000 million generates an increase in taxes of 150 million euros in the following period, according to the model obtained in the 2020 report of “Ricardian equivalence” to the Spanish case, together with the basic government budget constraint. “Therefore, given an expected increase in debt of 112,580 million, the fiscal cost may be increased by 17,326 million euros, which means, in per capita terms, paying 365.52 euros more each year or 5 more days of salary” , concludes the report. Specifically, for the next year 2022, the latest moving average predicts that, in 2022, it would take between 196 days -in the low range- and 201 days -in the high range- of family income to pay taxes.
“It is reasonable to think that early tax increases may occur in the coming months, for which taxpayers need to be prepared,” says the Civismo report. “We run the risk that the resources generated by families during confinement have to be used to pay more taxes instead of contributing with investment to a quick exit from the coronavirus crisis,” the document adds.
The Spanish tax map
At the regional level, the most relevant changes for the purposes of real effective taxation are the following -leaving aside the changes in deductions of little relevance to the generality of taxpayers-, distinguishing three differentiated models in the application of tax policy in the scope of its powers.
On the one hand, regions where the tax burden on earned income and wealth continues to be lowered: the case of Andalusia, Murcia and Castilla y León. On the other hand, regions where the tax burden increases: Valencian Community and Catalonia (effect of the tax increase applied in 2020).
On the other hand, there is a third model in the foral regions. In these communities there have been no significant changes, but with the potential for a tax increase based on the needs of public spending and the assumption of more state powers.
“A Spanish family has gone from paying 44% of their total income in taxes at the end of the 20th century to 54% in 2021,” says Javier Santacruz
The economist Javier Santacruz, author of the report, points out that “Spanish families pay proportionally more taxes than what they earn, be it in the form of wages, professional income or savings in the last 20 years. Thus, a Spanish family has gone from pay taxes from 44% of their total income at the end of the 20th century to 54% in 2021. “Therefore, they have to dedicate more than half a year of their income to paying taxes,” he adds.
Tax Freedom Day comes later this year than last. In 2020, Spaniards worked, on average, a total of 178 days to fulfill their obligations with the Treasury. That is, Fiscal Liberation Day, which Fundación Civismo calculates annually, one day earlier than in 2019, but because last year was a leap year. This is in line with the stability of the two previous years (2018 and 2019). A trend that, however, has been broken in 2021, after the threat of tax increases of which last year’s report already warned was fulfilled.
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