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The year Spaniards paid most tax

Source: El Pais - Mon 13th Apr 2015
The year Spaniards paid most tax

Last year, Spaniards paid more taxes than ever. Or to be more precise, "those who always have to pay are paying more than ever," in the words of Ignacio Conde-Ruiz, a researcher at Spanish thinktank FEDEA.

The fiscal burden of companies and families in Spain in 2014 was the highest on record, according to the Tax Agency's current series, which began in 1995. The statistics, which were updated several weeks ago, see the average rate for the main taxes – income, value added, company and special taxes – as high as 15.2%. The explanation for this lies in the notable hikes applied by the PP government.

The end result has been that, in spite of the lower numbers of people in work and companies operating in Spain, the state took in €175 billion in 2014, a figure only previously surpassed in the boom years of 2006 (€179 billion) and 2007 (€200 billion).

The combination of successive tax rises in recent years with the start of economic recovery has seen income tax and VAT revenues shoot up to record levels, despite the fact that there are three million fewer people in work compared to 2007, and that spending that is subject to VAT is €100 billion lower than eight years ago, before the crisis took hold.

The recessions that Spain has suffered since 2008 have transformed the country's social and economic outlook, bringing with them more inequality and laying bare the public accounts. Since 2010, the PSOE and current PP governments have resorted to tax rises to try to strengthen the anemic public administrations, whose accounts have been in the red since the crisis first took hold.

The PSOE administration of former prime minister José Luis Rodríguez Zapatero hiked VAT in 2010, as well as raising special taxes, getting rid of certain deductions for income taxes and raising rates for professionals and the self-employed.

While these measures had been criticized by current PM Mariano Rajoy while in opposition, he also raised taxes once he came to power at the end of 2011. He approved a sharp increase in income tax, which was in place until the end of last year, and got rid of tax deductions for homeowners. The PP government later raised VAT to maximum levels, increased special taxes on a number of occasions, and cleared company taxes of deductions and social benefits. And that's without even mentioning the 50 tax rises that regional governments approved during the same period.

The result is that in 2014, the average tax rate paid by Spaniards was the highest in at least two decades.

That's partly because last year saw all of these tax rises applied at the same time. But with local, regional and general elections all scheduled this year, Spain's governments are now easing off, with reductions coming in on income tax and company tax. This is also coinciding with clear signs of recovery in the economy.

But overall, the statistics paint a stark portrait of the country. Tax Agency figures released several weeks ago show that average household income in Spain has fallen 8.8% during the so-called Great Recession, having dropped 5.5% alone since 2011, when the PP government came to power. As Fedea researcher Ignacio Conde-Ruiz explains: "We are not paying more than ever, but we are doing so in a more unfair way than ever." Last year, household income increased just 0.2%, which was insufficient to recover levels lost in previous years, according to the Tax Agency.

Recommended Reading :

* How Spain spends your taxes

* Rajoy's Adviser : "No Election Spending Spree in Spain"