Effective rates

The average effective rate on income and spending in 2019 was 15.2%, slightly higher than in 2018. After 2014, the year in which the maximum was reached, the average rate decreased in 2015 and 2016 due to the direct tax reform and has then increased every year, but relatively moderately.

Table 1.3 Main taxes: tax bases, effective rates and accrued taxes (72 KB - xlsx )

Chart 1.16 (94 KB - pdf )

The slight upward trend is a consequence of the continued growth in the average effective rate supported by household gross income. In 2019 it stood at 12.8%, still without reaching its maximum (13%), also in 2014. The growth in the rate (0.7%) was produced by the increase in income that is not subject to withholding or payment on account; In fact, if the annual declaration is not included, the rate decreased by 0.2%. This fall is consistent with the greater growth in pensions (with a low average withholding rate) and with the limited increase in the effective wage rate (0.1% in 2019 compared to 1.1% in 2018), despite of salary increases. In this last case, the almost zero growth had to do with two factors: On the one hand, in the first half of the year there was still an impact of the reduction in withholdings on the lowest salaries (through the expansion of the reduction for work income approved in the 2018 Budget, a measure that particularly affected the SMEs), and, on the other, the greater growth of these salaries (linked to the increase in the minimum wage) which also have zero or very small withholdings. These same two elements (reduction and greater increase in the lowest pensions) serve to explain that the effective pension rate grew by only 1.6% (1.5% in 2018) compared to increases of around 3 % that occurred in years with pension revaluation close to zero and regulatory stability.

Table 2.1 Household income and personal income tax. (65 KB - xlsx )

The effective rate of Corporate Tax in 2019 is estimated at 20.6% if calculated on the aggregate tax base and 9.2% if calculated on the positive accounting result. In the absence of regulatory changes, as happened in 2019, the variations in the rate are exclusively due to composition (the effect of the different rhythm of profits and bases in companies with different effective rates). This effect is what explains the gently decreasing trend shown by the effective rate on profits since 2012.

Table 3.1 Corporate Tax: result, base, type, accrued tax and income. (57 KB - xlsx )

In VAT, the only modification in the rates that operated in 2019 was the reduction in the rate from the general to the reduced rate in cinemas, in force since July 2018, without a significant effect on the tax as a whole. Thus, the average effective rate was around 15.3%, which is the average since 2016.

Table 4.1 VAT: tax base, effective rate and accrued tax. (51 KB - xlsx )

The average effective rate on Special Taxes (II.EE.) rose by almost the same percentage by which it decreased in 2018. It should be noted that, to complete the aggregate analysis of bases, type and income, it is necessary to calculate a value for the consumption subject to these taxes, although in several of the figures the base is physical consumption and not the value. Hence the large fluctuations in the rate from one year to the next, caused, as has been pointed out when talking about the bases, by the variations, sometimes drastic, in energy prices. In this context, with the rates calculated with all the collection accrued on the value of consumption (not with the general rate on physical consumption as is done, for hydrocarbons, in the special taxes section), the most notable thing in 2019 is the considerable increase that occurs in the rate of the Hydrocarbon Tax due to the integration of the regional rate into the special rate of the tax. The measure was approved in the 2018 Budget, but its entry into force was delayed until January 1, 2019. The main effect of this measure was a change in the way the tax was paid (previously it appeared directly in the accounts of the Autonomous Communities. and since 2019 it is first part of the State accounts and then transferred along with the rest of the participation in taxes; More details of this change can be found in Information Note 5 of the 2018 Annual Report), but, in the process of harmonizing the rate in all the Autonomous Communities, the measure also represented an increase in the rate. Other changes, such as the exemptions for natural gas, diesel and fuel oil used in the generation of electrical energy incorporated by RDL 15/2018, barely had any effect on the average rate.