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Who pays taxes?

Glossary

  • Tax base : Amount set by tax laws that establishes the taxpayer's financial capacity. This amount is included, for example, in the Personal Income Tax for the income that a person earns in the year and depending on the classification of said income, it will be divided into two parts: general (salary, rent, etc.) and savings (interest on bank accounts, stock sales, etc.). In Value Added Tax, the taxable base consists of the price of the product purchased or the service received. This amount is multiplied by a percentage, also called a rate or tariff, set by law.

  • Economic capacity : The one that the legislator takes into account when establishing each tax payable by taxpayers. Earning income, owning assets, acquiring an inheritance or a donation, or purchasing goods are considered to represent economic capacity, also known as tax capacity, because taxpayers make their tax contributions to the Public Treasury based on this capacity. That is, it is the money that one has, or that one can demonstrate that one has based on the things one buys or owns. Therefore, economic capacity is an indicator of tax capacity, because it shows how much a citizen can and should pay in taxes. Those with greater economic capacity have greater tax capacity (and vice versa).

  • Contributor : A person, natural or legal (a legal person is a company or similar), that contributes to the maintenance of public expenditure through monetary contributions to the Public Treasury (mainly taxes) according to its economic capacity (income, assets, acquisitions, etc.) and in the amount provided by law.

  • Tax avoidance : Taxpayer behavior that uses a tax rule that was intended for a different purpose by the legislator, and which seeks to achieve an economic result prohibited by law or contrary to the tax rule (for example, filing an incorrect tax return to obtain a scholarship, grant or subsidy and then filing a supplementary return as if correcting an oversight, fictitious sales and purchases, sales that conceal donations, loans that are actually capital contributions but are taxed differently, etc.). In reality, it is skirting or circumventing the law: It is taking advantage of a tax rule that was intended for something else with the goal of paying less taxes.

  • Tax evasion : It is a behavior analogous to tax fraud, but it is a merely semantic distinction. Technically, evasion is synonymous with fraud. Socially, evasion seems to have a less strong meaning. However, in traditional tax vocabulary, evasion is broader than fraud: It includes tax fraud, customs smuggling, or the outflow of foreign currency from the country, etc. That is to say: Any illegal behavior that causes damage to the Public Treasury, whether or not related to taxes.

  • Tax fraud : Taxpayer behavior that hides, disguises, or manipulates their financial capacity to avoid paying the Treasury the amount of taxes they are required to pay under current laws.

  • Redistributive function of taxes : One of the objectives of taxes is to make those who have more pay more and those who have less pay less, so that the burden of public spending is distributed with greater social justice. Taxes also allow the State and other public administrations to redistribute the money they receive through public spending (for example, public healthcare for all, vaccination campaigns, money for research and social development, educational grants, home purchase assistance, transportation assistance, home assistance and residential care for the elderly and disabled, etc.).

  • Personal minimum and family minimum : This is the amount of money we all need to live with dignity and pay for our basic needs. Therefore, it is not subject to personal income tax. This amount varies depending on the taxpayer's personal and family circumstances (number of children, number of ascendants, number of disabled persons).

  • Tax obligations : They constitute a series of actions that, by legal mandate, must be carried out. For example, paying taxes on time and in the manner prescribed by law. Also, the provision of financial information required by tax law is mandatory, even if the result of this obligation is not a financial contribution.

  • Tax progressivity : Taxes can be settled according to the following criteria:

    • Everyone pays the same amount ("capitation");

    • Proportionately to their respective economic capacity (15%, for example); and

    • More than proportionally to their economic capacity ("progressive tax"). In this last modality, someone with, for example, an income of 30,000 euros pays 10% on the first 6,000 euros; 12% for the second 6,000 euros, 15% for the third 6,000 euros, etc. It means not paying a linear percentage for all the money you have, but rather distributing the money you have in tiers, with the percentage applied (tax rate) increasing as the money tier increases.

  • Spanish tax system : A set of taxes and other duties existing in Spain, established and regulated by law in accordance with the principles set forth in the Constitution.

  • Solidarity : It is the express adherence to the cause and reality of others, which is demonstrated by the express offer of support and the implementation of material and moral aid.

  • Progressive rate : Tax rate, rate, or percentage to be applied to the taxable base when it is expressed in monetary amounts and divided into sections, such that as the base increases and the next section is moved, the rate increases. It means applying higher percentages (tax rates) to higher income brackets.

  • Tributes : These are monetary contributions established by law to provide income to the Public Treasury so that it can cover public expenses. They are classified into taxes, fees and special contributions:

    • Taxes : These are the most important taxes that citizens must pay without any specific individualized compensation and are based on facts that demonstrate the economic capacity of citizens (for example: personal income tax or VAT).

    • Rates : These are taxes paid by citizens as a result of carrying out an administrative action that benefits them individually, but which they are obliged to request or receive (for example: garbage collection, or the issuance of ID cards).

    • Special Contributions : These are taxes that are paid when a public action aimed at satisfying a collective need produces a special benefit to certain individuals (for example: the increase in the value of a property as a result of the execution of a public work).