3. Corporate Tax

In 2020 corporate tax revenues lost a third of what was collected in 2019 ( %), standing at 15,858 million. You have to go back to 1999 to find a lower figure. However, these figures do not give a complete picture of what happened in 2020 with the main determinant of the tax, corporate profits. Part of the decline was not due to poor company results, but to the management of returns. In the 2018 declaration, submitted in 2019, the amount of the refunds requested was very large. If this negative impact is corrected, together with the positive impact provided by some extraordinary income and the one caused by the comparison with 2019, when there were extraordinary returns, the decrease would be around 23%, more in line with the fall in profits and the tax base.

Indeed, it is estimated that the consolidated tax base fell by 17.9% in 2020, slightly less than profits, which fell by 25.9% (Table 3.1). In the latter case, the rate exceeds those recorded in the previous crisis, after the real estate boom (Chart 3.1). The information provided by large companies and consolidated groups in their declarations of fractional payments (Table 3.2) shows that the reduction in the tax base was greater than the fall in the group of companies (-22.5%) and the same occurred with respect to profits (-34.5%). The decline was particularly severe in groups where profits fell by 44% and the tax base by 31.5%. This strong impact on the tax base of companies was observed from the beginning of the strict lockdown with losses close to 14% in the first quarter. In the central half of the year (the second payment includes the settlement between April and September) the drop reached, as in many other variables, around 25%. In the last quarter, losses were reduced to 6.3%.

One point to note with the available results is that the level of tax generated by these benefits was similar to that in 2014-2015. However, the level of profits in 2020 was around 12% higher than then (Chart 3.2). The uneven evolution of profits, tax base and accrued tax shows the slow erosion process that occurs in the effective rate (Table 3.1; Chart 1.16), especially the one calculated on the basis of positive results and despite the fact that in the specific case of this year there was a slight growth in the same and a drop in the effective rate on the tax base (-4.5%). The reasons for this trend, which, together with the low tax rates of some companies, are one of the most notable characteristics of the tax, can be analysed with the information provided in Table 8.5.

Given the drop in the base and the effective rate, the Corporate Tax accrued decreased by 21.6% in 2020 (Table 3.1). The data contains an estimate of the differential rate that will be known from July, although this time, unlike the two previous years, its weight is not as significant (without this rate the fall in tax would be 24.6%) as the contribution of the minimum payment within the fractional payments, one of the main causes of the discrepancies between the payments and the net rate finally accrued, loses importance. The tax was not affected by the regulatory changes because they were all aimed at facilitating compliance with tax obligations without altering the amount to be paid.

The majority of the tax is made up of fractional payments, which fell by 25.4% in 2020 (Table 3.2). The drop was greater in the groups (-37.6%), which is explained, in addition to the poorer performance of their profits, by the weight that these taxpayers had of the minimum payment, linked to profits and not to the tax base. Among the other companies, large companies not belonging to groups saw their payments fall by 15.7% and SMEs by 5.1% (-1.9% for those that calculated the payment based on their last annual instalment and -14.7% for those that paid taxes based on the profits of the year). Chart 3.3 represents the evolution of the fractional payments of the different companies since 2018. Although their impact on the total is very different and their characteristics also differ greatly, the trajectories show great coherence, only broken by SMEs that pay taxes according to the quota, whose payments, regardless of the actual activity, follow the pattern of successive steps that begin with the second payment (after filing the annual declaration in July) and last three payments (the data in the graph can be downloaded from this link ).

In 2020 corporate tax revenues decreased by % (Table 3.1). A significant part of the decline was due to the refunds made for the 2018 financial year. It should be noted that these refunds were requested in 2019 and, as usual, were paid between the end of 2019 and the beginning of 2020. The 2018 figures were also exceptionally high because the instalment payments made at the time were also high. This was compounded by a delay in making refunds. Table 3.3 and Chart 3.4 show in which year (t and t+1) the returns requested in any given year t were made. Both clearly show that the percentage of returns made in 2019 was lower than in previous years. However, the impact of this shift was cushioned by the existence of extraordinary income from judgments and by the comparison with 2019, when there were refunds also for this reason and by the payments of DTA (Deferred Tax Assets) to some companies (Table 1.5). If all these elements are corrected, revenue would have fallen 10 points less, around 23%, a figure very similar to that estimated for accrued tax (-21.6%). All these discrepancies between accrual and cash can be seen in the “change from accrual to cash” section of Chart 3.5.

The second element, extraordinary income and refunds from judgments and DTA, accounted for the majority of the regulatory changes, but not all of them. The total net impact of the regulatory and management changes was positive and amounted to €1,669 million, which was broken down as follows: 1.295 billion came from extraordinary returns made in 2019; 1.081 billion extraordinary income in 2020; -406 million returned in interest due to the unconstitutionality ruling of RDL 2/2016, which modified the method of calculating the fractional payments by the ruling; and -301 million due to measures linked to the fight against COVID, both in terms of compliance with tax obligations through deferrals and suspension of deadlines (-211 million), and in terms of reducing payments to small businesses (-90 million).