Effective rates

The effective on income and expenditure in 2019 was 15.2%, slightly higher than in 2018. After 2014, when the peak was reached, the average rate fell in 2015 and 2016 due to the reform of direct taxes and has since increased every year, but relatively moderately.

Table 1.3 Main taxes: taxable 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 borne by gross household income. In 2019, it stood at 12.8%, still not reaching its maximum (13%), also in 2014. The rate growth (0.7%) was due to 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 higher growth in pensions (with a low average withholding rate) and with the low increase in the effective rate on wages (0.1% in 2019 compared to 1.1% in 2018), despite the wage 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 from the reduction in withholdings on the lowest salaries (through the extension of the reduction for work income approved in the 2018 Budget, a measure that particularly affected SMEs), and, on the other hand, the greater growth of these salaries (linked to the increase in the minimum wage) which also have zero or very small withholdings. These two elements (reduction and greater increase in the lowest pensions) explain why 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 revaluations close to zero and regulatory stability.

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

The effective corporate tax rate 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 occurred in 2019, rate variations are due exclusively to composition (the effect of the different rate of profits and bases in companies with different effective rates). This effect explains the gently declining 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. The average effective rate was around 15.3%, which is the average since 2016.

Table 4.1 VAT: taxable 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, rate 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 the 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 discussing the bases, by the sometimes drastic variations in energy prices. In this context, with the rates calculated with all the revenue 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 Hydrocarbon Tax rate due to the integration of the regional rate into the special tax rate. 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 collected (previously it appeared directly in the accounts of the Autonomous Communities). and since 2019 it first forms part of the State accounts and then is transferred together with the rest of the participation in taxes; More details on this change can be found in Information Note 5 of the 2018 Annual Report), but, in the process of harmonising the rate in all the autonomous communities, the measure also entailed an increase in the rate. Other changes, such as the exemptions on natural gas, diesel and fuel oil used in the generation of electricity incorporated by Royal Decree-Law 15/2018, had little effect on the average rate.