3. Corporate Tax

In 2018 tax revenues from Corporate Tax grew to 24,838 million, 7.3% more than what was collected in 2017. The split payments, which are the main component of the tax, grew by 11.7% (especially in consolidated groups) due to the good performance of profits and the greater weight of the minimum payment within these payments. The growth of the tax was slowed by the increase in refunds, both from the annual declaration of campaigns settled in the year, and those from control actions.

The consolidated corporate tax base is estimated to have grown by 12.8% in 2018, an increase practically equal to that expected for profits (12.9%). In both cases, the 2017 figures are exceeded (7.3% and 9.9%, respectively) (Table 3.1). The forecast is made based on the fractional payments declared by large companies and tax groups, which are the taxpayers obliged to make advance payments for the profits obtained throughout the year. From the analysis of these payments (Table 3.2) it is concluded that the improvement observed in them was concentrated in a few consolidated groups, while in the rest of the companies the benefits moderated as the year progressed.

As noted in last year's report, in these years the process of recovering profits after the crisis that began in 2008 was being completed, and with a very different composition of these profits (with more real and less financial parts) than that observed in 2006 and 2007 (Table 8.4). According to the information available, the maximum profit level achieved in 2007 would have already been reached in 2017 and exceeded in 2018. This, as was also pointed out at the time, did not mean that the tax base and the tax were recovered with the same intensity, as can be seen in Tables 3.1 and 8.5 and shown in Chart 3.1.

The corporate tax rate is estimated to have increased by % in 2018 (Table 3.1). There were no regulatory changes, so the variation is due to composition effects (the bases of companies with a higher effective rate grow more).

The Corporate Tax accrued is expected to grow by 15.1% in 2018 (11.1% without the differential rate to be filed in July; Table 3.1). Of the additional €3.2 billion that this growth represents, nearly 80% corresponds to the split payments and the rest comes from the lower negative differential rate and the increase in capital gains tax.

The main component of the tax is split payments, which grew by 11.9% in 2018. The behaviour of these payments was very different in the different groups of taxpayers (Table 3.2). In large companies and consolidated groups, which pay taxes according to their profits, the increase in payments reached 13.5% (18.3% in groups and 5.4% in companies not belonging to groups), well above what was achieved in 2017. The improvement occurred in a very concentrated manner in the groups (Chart 3.2) and, in particular, in a small number of them; In the rest of the companies, growth in 2018 was lower than in 2017. It is also worth highlighting the increase in the minimum payment contribution. For their part, payments to SMEs (which are taxed according to the last annual payment submitted) grew by 2.3%, which represented a sharp contraction compared to the growth of the previous three years.

As has been pointed out in recent years, the fact that the split payment in large companies and groups has a minimum payment based on the accounting result has implications on the way in which the tax is paid (more split payments and negative differential rate; Chart 3.3) and the amount of refund requests (the larger the contribution of that payment, the larger the refund requests tend to be; Chart 3.4). And all of this affects the adjustment between accrual and cash (payments are entered in the year of accrual, but refunds are requested the following year and paid between that year and the following year), an adjustment that, in aggregate form for the entire tax, appears in the penultimate block of Chart 3.5.

Tax increased by % (Table 3.1). Such a large difference in the growth of the tax accrued is explained, apart from the usual conceptual differences, by the earlier pace of refunds that occurred in 2018 compared to the previous year. If this element is corrected, the revenue growth would be 12.8%, a figure closer to accrual.

From this and the analysis of the tax accrued, it can be deduced that the two elements that determined the trajectory of the tax in 2018 were the high growth of the fractional payments (11.7%; Table 3.2) and returns (14.1%; Table 7.2), the first ones linked mainly to the behaviour of profits in 2018 and the second ones linked to the declarations and settlements of previous years. Regarding the latter, there are three reasons that explain such high growth in 2018: the sharp increase in the number of refunds requested in the 2016 campaign, most of which were made in the first months of 2018 (Table 3.3); the advance in the rate of issuance of refunds for the 2017 financial year (requested from July 2018 and the amount of which was approximately the same as in the previous year) (Table 3.3); and the increase in refunds arising from settlements made by the Administration (Table 7.2).