4. The tax over the value added

tax revenues from VAT 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 revenue of factors related to previous years; Specifically, the refunds made for 2017, the adjustments with the regional territories and the decrease in income from other periods (a consequence of the changes in the management of deferrals that took place in 2017 and whose effects were carried over into 2018).

In 2018 final expenditure subject to VAT grew by 5.6%, compared to 6.4% the previous year (Table 4.1). The increase in prices was approximately the same as in 2017, so that the moderation in growth mainly affected the real part (see Chart 4.1) and the second half of the year (in the first half, spending grew by 6.7% and in the second by 4.5%).

By component, the slowest growth rate was concentrated in household consumption spending, which increased by 5.2%, more than one point below the growth recorded a year earlier. It was also in the second half of the year that the loss of growth intensity was felt (this expenditure grew by 6.5% in the first six months and by 3.9% in the following ones). As with total expenditure, this is the fifth consecutive year of growth in this component, at an average rate of almost 5.5% and in parallel with the sustained growth in family incomes (see Chart 4.2). For its part, the expenditure of the AA.PP. grew more than in 2017 (4.9% compared to the previous 3.4%), mainly due to the performance of investment spending, which increased by almost 12%, practically double that of 2017. Spending on new housing experienced a similar growth to that of 2017 (16.3%). By the end of 2018, there had already been eight consecutive quarters in which double-digit increases in this expenditure had been recorded. Other indicators related to new housing show the same profile (see Chart 4.3).

The effective rate of VAT remained close to 15.3%, which is the level reached after the last increases in the general and reduced rates in September 2012 (Table 4.1). There were no regulatory changes with a significant impact on the rate. The only thing that occurred was the reduction in the rate for cinemas, from the general rate to the reduced rate, and only for half a year (after the approval of the Budget in July). The impact was of little quantitative importance (Table 1.5).

The VAT accrued in the period grew by 5.6%, the same, given the stability of the effective rate, as the subject expenditure (Table 4.1). The net VAT accrued (which differs from the previous one because it includes the variation in the balance that companies leave to compensate from one year to the next) grew a little less, 5.3%.
None of the accrued VAT measures are affected by the SII because in these measures the tax is recorded at the time of accrual and not at the time the tax is actually paid or returned. For this same reason, the accrual series are not distorted by the changes in the management of deferrals that have altered the evolution of income in the last two years.

The realization of the VAT accrued in income and refunds occurred in similar proportions to those of 2017 (Table 4.2). Gross VAT accrued grew by 5.7% (6.1% in 2017), which represents a gross VAT/VAT accrued ratio almost the same as in recent years. It must be remembered in this sense that, as noted in last year's report, this ratio had stabilized after the various changes in the management of the tax (the last was, in February 2015, the settlement of Customs VAT through of self-assessments) that had caused a decrease in the ratio from historically higher levels. Chart 4.4 illustrates the evolution of this relationship between net accrued tax, income and refunds.

According to statements, the growth of gross VAT was very even. In the monthly declarations (Large companies, groups, other operators covered by the monthly refund regime and import VAT) the increase was 6%, while 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.

As for refund requests, they grew by 7% in the year as a whole, half a point less than in 2017. Annual applications, linked to the reduced rates at which smaller companies sell, increased by 7.9%, while monthly applications, more related to exports (Table 8.6), increased by 6.8%.

As in 2017, in 2018 there was a significant difference between the behaviour of tax accrued and income. The discrepancy is fundamentally due to three factors: the impact of the SII, the decrease in income from other periods and the evolution of the refunds made.

Regarding the first two, as stated, they do not affect the tax accrued, but they do affect income. As regards the impact of the SII, it should be noted that in 2017, when the new system was implemented, there was a shift in income from that year to 2018 valued at 4.15 billion. The reason for this shift was the delay in the deadline for filing self-assessments, which moved from the 20th of the month following the accrual to the 30th, meaning that, for accounting purposes, the income was shifted by one month. In principle, this impact should have been exactly offset in 2018. However, its final effect in 2018 was lower due to changes in taxpayer behavior. Since the beginning of the new system, it was observed that, despite the delay in the due date, some taxpayers continued to file their returns on the 20th. Therefore, the income of these taxpayers did not shift from 2017 to 2018. However, the number of these taxpayers and the amount of their income decreased throughout the year; That is, an increasingly larger part of the income was produced on the 30th of the month. Compared to the previous year, this means that in 2018, although the 4.15 billion transferred from 2017 were entered, there was also a new (smaller) shift to 2019 caused by taxpayers who moved from filing on the 20th to filing on the 30th. This explains why the impact is slightly lower than that recorded in 2017 (Table 1.5).

As regards deferrals, the tightening of the granting of deferrals in 2017 did not affect the accrual, but, for the purposes of collection, it meant an advance on income in that year and, consequently, lower income from previous periods in 2018.

The third element is the evolution of the returns made, particularly the annual ones. It should be noted that annual refund requests for any year are submitted at the end of January of the following year and are mostly made throughout that year. This fact already introduces differences between accrual and cash, but, in addition, the percentage of returns made in the same year of their presentation may vary. Thus, in 2018, applications corresponding to the 2017 financial year were returned, which had grown by 4.9%. However, the pace of completion was higher than the previous year (90% of those filed in 2018 were made in that year compared to 86% in 2017), raising the growth of annual returns to 9.5%.

In terms of cash, gross income grew by 9.1% in 2018, a growth that includes the shift in income caused by the SII. Correcting for that shift, the increase was 4.6%. The slowdown would have been more intense in the cash figures than in the accrual figures, but it is necessary to take into account, as indicated above, the upward impact that the change in the management of deferrals had in 2017 and that in 2018 was reflected in the decrease in income from previous periods (-1.4%; Table 4.2, other income). If only self-assessments and customs revenues are considered, the growth would be somewhat higher (5%) with a similar behaviour in monthly and quarterly declarations of SMEs (5.1% and 4.8%, respectively).

For its part, refunds issued grew by 5.9% (Table 4.2), more (7.4%) if we correct for the advance in refunds that the SII represented in 2017. As seen, annual returns (mostly from the 2017 financial year) and those derived from regional adjustments (9.3%) increased in particular. However, monthly refunds (mostly in 2018) rose by only 4.3%, below the 6.8% of those requested, which indicates, contrary to what happened with annual refunds, a slower pace of their completion.