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Fiscal year 2018

3. Corporation Tax

In 2018 Corporation Tax revenues grew to €24,838 million, up 7.3% on the figure raised in 2017. Instalment 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 in these payments. The growth of the tax was slowed down by the increase in refunds, both those of the annual tax return of the campaigns settled in the year and those from control activities.

It is estimated that the consolidated tax base for Corporation Tax grew by 2018% in 12.8, an increase practically the same as that expected for profits (12.9%). In both cases, the records of 2017 (7.3% and 9.9%, respectively) are exceeded (Table 3,1). The forecast is based on the payments declared by Large Companies and tax groups that are taxpayers obliged to pay on account for the profits obtained during the year. From the analysis of these payments (Table 3,2), it is concluded that the improvement observed in these payments was concentrated in a few consolidated groups, while in the rest of companies the profits were moderate as the year progressed.

As noted in last year's report, the recovery of profits after the crisis was being completed in these years which began in 2008, and with a very different formation of this benefit (with more real and less financial) than was observed in the years 2006 and 2007 (Table 8,4). With the information available, the maximum profit level that had been achieved in 2017 had already been reached in 2007, and in 2018 it would have been exceeded. As noted above, this did not mean that the tax and tax base would be recovered with the same intensity, as can be seen in Tables 3,1 and 8,5 and shows Chart 3,1.

It is estimated that the effective rate of Corporation Tax increased by 2018% in 2 (Table 3,1). There were no regulatory changes, so the variation is due to the composition effects (the foundations of companies with the highest cash rate are growing more).

Corporation Tax accrued is expected to grow by 2018% in 15.1 (11.1% without the differential payment to be presented in July; Table 3,1). Of the additional 3,200 million that this growth entails, close to 80% corresponds to the split payments and the rest comes from the lower negative differential payment and the increase in the withholdings on movable capital.

The main component of the tax is the instalment payments that grew 11.9% in 2018. The performance of these payments was very different in the different groups of taxpayers (Table 3,2). In Large Companies and consolidated groups, which pay tax according to their profits, the increase in payments reached 13.5% (18.3% in groups and 5.4% in non-group companies), well above what was achieved in 2017. The improvement was very concentrated in the groups (Chart 3,2) and, in particular, in a small number of them; In the rest of companies, growth in 2018 was lower than that of 2017. It is also important to highlight the increase in the contribution of the minimum payment. Payments in SMEs (which are taxed according to the last annual fee filed) grew by 2.3%, which led to a sharp contraction with respect to the growth of the previous three years.

As has been noted in recent years, the fact that the payment in instalments in Large companies and groups has a minimum payment based on the accounting result has implications for the way the tax is deposited (more instalment payments and negative differential payment; Chart 3,3) and in the amount of the refund requests (the higher the contribution of that payment, the higher the refund requests are, Chart 3,4). And all this affects the adjustment between accrual and cash (payments are paid in the year of accrual, but refunds are requested per year next, and are paid between that year and the subsequent year), which, in aggregate form for the entire tax, is in the penultimate block of Chart 3,5.

Tax revenues grew by 7.3% (Table 3,1). Such a huge difference with the growth of the accrued tax is explained, apart from the usual conceptual differences, by the advance of the rate of return that took place in 2018 compared to the previous year. If this element is corrected, the growth of income would be 12.8%, which is closer to accrual.

From this and the analysis of the tax accrued, it follows that the two elements that determined the trajectory of the tax in 2018 were the high growth of the instalment payments (11.7%; Table 3,2) and refunds (14.1%; Table 7,2), the first ones mostly linked to the performance of profits in 2018 and the second ones linked to the previous years'declarations and settlements. With regard to the latter, there are three reasons that explain such a high growth in 2018: The sharp increase in refunds requested for the 2016 campaign, most of which were made in the first months of 2018 (Table 3,3); The advance in the rhythm of the refunds corresponding to the 2017 financial year (requested from July 2018 onwards, the amount of which was approximately the same as in the previous year) (Table 3,3); And the increase in refunds derived from the settlements made by the Administration (Table 7,2).