Effective rates

The average effective rate on income and expenditure remained practically at the same level as 2017. In 2018, there were some regulatory changes, but they were offset by the evolution of terms and prices. The average rate remains unchanged at around 15% since 2013.

The effective rate on gross household income remained stable in 2018 (Table 2,1). The stability concealed three elements that affected the rate in 2018, which are of different signs, one upward and two downward. First, the average withholding rate for wages and pensions increased, 1% in the first case and 2.2% in the second case (Table 2,3). In wages, the result contrasts with the stability of the previous two years, after the tax reform. The reason for the change is the increase in average wages (also unlike previous years) and the drag that this caused on the average withholding rate. In pensions, the rise in the rate is part of the normal evolution as pensioners with pensions and a higher average rate are incorporated into the pension system. However, and this is the second element, both increases were limited in the second part of the year, after the approval of the Budgets, as the reduction for earned income was increased with the consequent reduction in the rate of wages and lower pensions. Finally, a third element that influenced the rate to fall was the new family deductions, whose effect will only be complete in the annual tax return (the extension of old family deductions only had a small effect on early deductions in 2018 and others, such as childcare expenses, can only be applied in the annual tax return). This last element explains that although the average rate did not increase in 2018, it did (1%) the estimated rate without including the differential payment and family deductions.

The effective rate of Corporation Tax in 2018 was 21.3% on the aggregate tax base and 9.9% if calculated on the positive accounting result. In both cases, this represents an increase compared to 2017, which, in the absence of regulatory changes, as is the case, must be attributed to the composition effects (the foundations of companies with the highest cash rate grow more). In any case, the rate in 2018 is not far from the average of the last 10 years.

In VAT, there were no significant regulatory changes (only the reduction in the rate in cinemas and for half a year), so the rate the average remained close to 15.3%, which is the level reached after the latest rate hikes and reduced in September 2012.

In Special Taxes (IIEE), the variation in the rate observed in 2018 is related, as happened in 2017, to the rise in energy prices. Remember that, in order for an aggregated average rate to be obtained, the type of the IIRs This section calculates the value of consumption, although in some of these figures (especially in Hydrocarbons Tax) the basis is physical consumption, not the value. It was precisely in the Hydrocarbons Tax that the only regulatory changes occurred, although they were marginal. These changes came from the approval of RDL15/2018, urgent measures for the energy transition and consumer protection, which included the elimination of the tax for natural gas, diesel and fuel used in the generation of electricity.