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Fiscal year 2018

4. Value Added Tax

VAT tax revenues amounted to €70,177 million, 10.3% more than in 2017. The figures are affected by the impact of the SII. If corrected, growth would be 3.7%. This latest growth underestimates the dynamism shown by the tax in 2018 due to the effect on the collection of factors related to previous years; Specifically, refunds made for 2017, adjustments with the regional territories and the decrease in income from other periods (as a result of changes in the management of deferrals that took place in 2017 and whose effects were dragged in 2018).

In 2018, the final expenditure subject to VAT grew by 5.6%, compared to 6.4% in the previous year (Table 4,1). The price increase was approximately the same as in 2017, so the moderation of growth affected the real part ( see Chart 4,1) and the second part of the year (in the first half the expenditure grew by 6.7% and in the second half by 4.5%).

By components, the lower growth rate was concentrated on household consumption expenditure, which increased by 5.2%, more than one point below the growth recorded one year earlier. It was also in the second half of the year that the loss of growth intensity was accused (this expense grew 6.5% in the first six months and 3.9% in subsequent months). As with total expenditure, it is the fifth consecutive year of an increase in this component, at an average rate of almost 5.5% and in parallel with the sustained growth of family incomes (see Figure 4,2). For its part, the expenditure of the Public Administrations. It grew more than in 2017 (4.9% compared to the previous 3.4%), due, above all, to the performance of investment spending that increased by almost 12%, practically double that in 2017. New housing expenditure grew similar to 2017 (16.3%). At the end of 2018, eight consecutive quarters were already in which two digit increases in this expense had been recorded. Other indicators related to the new home show the same profile (see Figure 4,3).

The effective rate of VAT remained close to 15.3%, which is the level reached after the latest rate hikes and reduced in September 2012 (Table 4,1). There were no regulatory changes with a significant impact on the rate. Only the rate fell in cinemas, from general to reduced, and only for half a year (after the July Budget was approved). The impact was of little quantitative importance (Table 1,5).

VAT accrued in the period grew by 5.6%, the same as in view of the stability of the effective rate, as the subject expense (Table 4,1). Net accrued VAT (which differs from the previous one because it includes the variation in the balance that companies stop compensating from one year to another) grew a little less, 5.3%.
None of the VAT accrued measures is affected by the SII because in these measures the tax is recorded at the time of accrual and not at the time when the tax is actually paid or refunded. For the same reason, the accrual series are also not distorted by changes in the management of the deferrals that have altered the evolution of income in the last two years.

The VAT accrued in revenue and refunds was specified in proportions similar to those of 2017 (Table 4,2). Gross accrued VAT grew by 5.7% (6.1% in 2017), which represents a gross VAT/VAT ratio accrued almost the same as in recent years. It should be recalled in this regard that, as noted in last year's report, this ratio had stabilised following the various changes in tax management (the last was, in February 2015, the settlement of Customs VAT through self-assessments) that had caused a decrease in the ratio from historically higher levels. Chart 4,4 illustrates the evolution of this relationship between the net accrued tax, income and refunds.

For tax returns, the growth of gross VAT was very near. In monthly tax returns (Large companies, groups, other operators included in the monthly refund and import VAT regime) the increase was 6%, whereas the VAT of SMEs declared quarterly increased by 5.2%. in the latter case, the deceleration of the last part of the year was more pronounced.

For the return applications, in total, they grew 7%, half a point less than in 2017. Annual applications, linked to the reduced rates sold by smaller companies, increased by 7.9%, while monthly applications, more related to exports (Table 8,6), made it 6.8%.

As in 2017, there was a great difference between the performance of the tax accrued and income in 2018. The discrepancy basically arises in three factors: The impact of the SII, the decrease in income from other periods and the evolution of refunds made.

As for the first two, as has been said, they do not affect the tax accrued, but they do affect income. As regards the impact of the SII, it should be recalled that in 2017, when the new system was implemented, income moved from that year to 2018 valued at 4,150 million. The reason for this shift was the delay in the deadline for filing self-assessments, which passed from the of the month following the accrual date to the , so for accounting purposes, the deposit was moved one month. 20 30 In principle, this impact should have been accurately offset in 2018. However, its final effect in 2018 was lower due to changes in the behavior of taxpayers. Since the start of the new system, it was noted that, despite the delay in the maturity date, some taxpayers continued to file their tax returns on the . 20 Therefore, the income of those taxpayers did not move from 2017 to 2018. However, the number of those taxpayers and the amount of their income decreased throughout the year; In other words, a greater part of the income was being produced on the of the month. 30 Compared to the previous year, this means that, in 2018, although the 4,150 million displaced persons were admitted in 2017, in turn there was a new (minor) to 2019 movement caused by taxpayers who moved from the presentation on the to the presentation on the . 20 30 This explains that the impact is slightly lower than that recorded in 2017 (Table 1,5).

With regard to deferrals, the tightening of the granting of deferrals in 2017 did not affect accrual, but for the purpose of collection, it represented an advance in income in that year and, consequently, lower income from previous periods in 2018.

The third element is the evolution of the refunds made, in particular the annual ones. It should be taken into account that annual refund applications for any year are submitted at the end of January of the following year and are mostly made during that year. This already introduces differences between accrual and the cash, but in addition, the percentage of refunds made in the same year of presentation may vary. Thus, in 2018, the requests for 2017 were returned, which had increased by 4.9%. However, the pace of performance was higher than the previous year (90% of those presented in 2018 were made in that year compared to 86% in 2017), raising annual refunds to 9.5%.

In cash terms, gross revenues grew by 9.1% in 2018, which includes the shift in income caused by the SII. Correcting this shift, the increase was 4.6%. The deceleration would have been more intense in cash figures than in accrual, but it should be taken into account, as noted above before, the upward impact that had been seen in 2017 in the management of the deferrals and that in 2018 was reflected in the decrease in income from previous periods (- 1.4%; Table 4,2, rest of income). If self-assessments and Customs revenues are considered as nothing more, growth would be somewhat greater (5%), with similar performance in monthly and quarterly declarations of SMEs (5.1% and 4.8%, respectively).

Meanwhile, the refunds made grew by 5.9% (Table 4,2), more (7.4%) if they are corrected from the advance of refunds that the SII represented in 2017. Annual refunds (mostly in 2017) and those derived from the foral adjustments (9.3%) have increased, as has been seen. On the other hand, monthly refunds (mostly in 2018) increased by just 4.3%, below 6.8% of those requested, which indicates, contrary to what happened with the annual refunds, a lower rate of fulfilment of the same.