Spanish State Already Collects 3.5% More Taxes Than Before Pandemic

The Spanish economy seems to have put the automatic pilot of the recovery in light of the employment data of last June and the forecast of an unprecedented growth in the second quarter of the year, of 18%.

All this seems to have a decisive impact on the relaunch of activity, demand, and the consumption of services until a few weeks ago, limited by the restrictions of the pandemic, with a special impact on tourism in the case of Spain.

However, the arrival of summer seems to have set in motion all the macroeconomic machinery – as long as the spread of contagion allows the current state of activity to be maintained – and is already reflected in the levels of tax collection, which are already over 3, 5% to pre-pandemic records.

Specifically, between the months of January and May of this year, a total of 81,583 million euros were collected in our country through taxes. This figure is, as it would seem evident, 13.7% higher than last year (about 10,000 million euros) but also exceeds by 2,768 million (3.5% more) the collection figure registered in the same period of 2019 , one year before the outbreak of the health crisis.

In other words, according to these figures published by the Ministry of Finance, Spaniards already contribute to the state coffers above pre-crisis levels. What, furthermore, also anticipates with certainty strong economic growth in the coming months of the year.

Tax roadmap
Furthermore, these figures are highly linked to the unique dynamics of the economic crisis caused by the pandemic. In this way, it seems evident that the greater or lesser speed with which the Spanish economy will recover – the less optimistic projections delay the prepandemic levels of GDP and employment at the end of 2023 – will be accompanied by a greater contribution from the figures subject to these. elements, such as IRF or VAT, more linked to the upturn in demand and consumption.

However, these figures could still increase during the next year if the Government finally completes the tax reform entrusted to the committee of experts for February 2022 , with which the tax burden of Spaniards could be raised to the levels of partner countries of the EU.

Specifically, according to official estimates, the weight of the tax burden prior to the pandemic was 35% of GDP . From there, the path of the Executive is to reach 37% by 2030 (24,000 million more than the prepandemic collection); 40% in 2040 and equal to the current European average, at 43%, by 2050 (96,000 million more than in 2019).

Skepticism reigns
However, the experts’ reading of these government plans seems to coincide in the negativity that, at this moment of recovery, entails burdening the social agents responsible for job creation with greater contributions, and the possible limiting effect on growth that it could lead to being carried out.

“Any tax increase will have a negative impact on economic activity , although some increases may have a greater impact than others. It would be necessary to see what exactly the tax reform will consist of in order to make an assessment”, points out the senior economist of Funcas, María Jesús Fernández, on the global tax plan of which details are not yet known.

“The good tax reform that does not limit growth involves adjusting the taxation of small companies so that it is not an obstacle to their growth and also through rationalizing the taxation of large companies so as not to give them an extra bonus simply because of their size. Fundamentally, good tax reform involves broadening tax bases, both for personal income tax and for companies.

These two criteria lead to a tax system that not only does not limit growth and job creation, but also stimulates both. Finally, good tax reform must increase the weight of direct taxation and reduce indirect taxation, “says Antonia Díaz, PhD in Economics from the University of Minnesota and professor at the Carlos III University.