3. Corporate Tax

Corporate tax revenues in 2019 amounted to million, 4.4 less than in 2018.

The year was characterised by extraordinary refunds (without any link to tax determinants) and low growth in profits, tax bases and, therefore, revenues.

In 2019 profits are expected to grow by 2.3% and the consolidated tax base 0.5%. The figures are significantly lower than those observed in 2018 (Table 3.1). The information used for the estimate comes from the declarations of the fractional payments of the Large Companies and tax groups that pay taxes on the profits of the period. According to the information reported (Table 3.2), profits in 2019 decreased compared to 2018, a drop concentrated in consolidated groups and more specifically in a small group of five groups that were the same ones that the previous year had been the protagonists of the strong growth recorded in payments. Large companies also saw their growth reduced, but still maintained a slight increase (1% compared to 6.1% in 2018).

The evolution in 2019 widens the divergence between profits and the tax base. Profits reached their pre-crisis peak in 2017 (just ten years earlier), but the tax base was still below 70% of the total. Part of the lower recovery of the base has to do with the changes that were introduced in the 2015 reform (by including amounts that were previously deducted from the quota in the adjustments), but the tax itself has not recovered beyond the 63.8% it represented in 2007 (Chart 3.1). The details of the transfer of benefits to base can be found in Table 8.5. There it can be seen that in the last four years the difference between pre-tax profits and the taxable base (without the adjustment of the bases to rates of 0% and 1%) has been growing and that, on average during that period, nearly 90% of that difference corresponded to the adjustment of the exemption for double taxation.

The effective rate on the basis of the Corporate Tax would have had a small increase in 2019 (0.4%; Table 3.1). Given the higher profit growth, the effective rate would decrease by 1.5%. By eliminating the annual declaration from the tax, the impact on the rate of the very different behavior that occurred in payments and in the quota in 2018 and 2019 is clearly observed: Without a differential rate, the rate rose by 4.3% in 2018 and fell by 5.6% in 2019.

The Corporate Tax accrued is estimated to have grown by 0.8% in 2019 (Table 3.1). The result of the annual declaration, which will be submitted in July, is still unknown. Without it, the tax accrued falls by 5.2% due to the negative performance of fractional payments (almost 90% of the tax without the quota).

Indeed, split payments decreased by 6.7% in 2019 (Table 3.2). The level of payments was not low, but it is compared to a year, 2018, with exceptional growth in payments, an increase that was also highly concentrated in five consolidated groups. Thus, payments by consolidated groups fell by 14.6%, while those by large companies not belonging to groups grew slightly (0.7%) and those by SMEs (which mostly file their tax returns based on the last annual payment and not on their profits) rose by 10.9%. Chart 3.2 clearly illustrates the ups and downs in rates over the past two years through the contribution of each group of companies to the variation in payments.

The exceptional growth in 2018 was also based on the minimum payment (the five groups mentioned paid taxes based on the minimum payment linked to the accounting result and not on the tax base, which in some of them is zero or very low). Yes, of course, the payment affects the result of the annual declaration, even more so when what increases the payments is this minimum payment, which has no equivalent in the tax declaration. In 2018, the heavy weight of the minimum payment meant that refund requests increased to 11 billion (Table 3.3), a figure never before reached, and therefore, the differential rate was the most negative in the historical series. Figures 3.3 and 3.4 illustrate the relationship between payments, differential rate, minimum payment and refund requests.

revenue in 2019 decreased by 4.4% (Table 3.1). The difference with the growth of the accrued tax is due, as happens every year, to the presentation of the 2018 declaration in July 2019 (with a greater impact on this occasion due to the peculiarities of 2018 that have just been seen), but in addition in 2019 extraordinary refunds were made for an amount greater than 1,200 million (Table 1.5), linked to sentences and the payment of the amounts requested by DTA (deferred tax assets), which had nothing to do with the evolution in 2019 of the bases and the tax. Without them, revenue would have increased by 0.4%.

As seen, split payments decreased. In cash terms, they fell by 6.3% (Table 3.2). But this fall was offset by two elements. The first was the good results recorded in the 2018 annual statement. Revenue from this concept grew by 10% (Table 3.1). The second was the lowest amount of the returns from that annual declaration made in 2019 (Table 3.3). It should be remembered that the refunds requested in 2019, corresponding to the 2018 fiscal year, were paid mainly in 2020, so that the refunds made in 2019 include a large part of the 2017 campaign (requested in 2018 and paid, mainly, at the beginning of 2019) and the first refunds made for the 2018 fiscal year; In both cases they decreased, although the latter decreased significantly more.