4. The tax over the value added

VAT collection decreased by 11.5% in 2020, to 63,337 million, which represented a loss of more than 8,000 million compared to the income achieved in 2019.

The effects of confinement and other restrictive measures, as well as limitations on mobility, had a strong impact on the evolution of gross VAT, which fell by 9.4% (Table 4.2). The trend in gross income, not being affected by refunds, which include requests corresponding to 2019, is more in line with what happened throughout the year, with a sharp drop in the second and third quarters, followed by a rebound in the final part of the year. In the recovery of income in the last months of 2020, the income from the largest deferrals requested, linked to the measures aimed at facilitating the fulfillment of taxpayers' tax obligations, was particularly relevant. Refunds, on the other hand, fell at a slower pace (-4.1%), as a large part of the higher monthly claims from the previous year were paid in 2020, which explains why the drop in net income exceeded that of gross income.

final expenditure subject to VAT fell by 13.3%, seventeen points below the increase recorded in 2019 (Table 4.1). The decline is consistent with the general slowdown of the economy, in a context of virtual price stability.

The expenditure component most clearly affected by the pandemic was household consumption spending, which fell by 16.3%. Both the lockdown and other restrictions severely limited this component, extraordinarily widening the gap between the evolution of gross household income and their consumption expenditure (Chart 4.1). This fact caused its weight on total subject expenditure to lose three points in 2020 compared to the average observed in the previous four years (Chart 4.2). Spending by the Public Administrations It was the only component that showed a positive evolution, growing to 4.4%, as a result of the greater outlay associated with dealing with the effects of the pandemic. Spending on new housing fell by 5.7%, losing almost eleven points compared to 2019, a year that closed with a growth of 4.9%, after registering a significant slowdown compared to the growth of previous years, showing a trend consistent with that observed in new housing transfers.

The effective rate of VAT remained practically unchanged for another year (-0.4%), with no notable changes since the last increases in the general and reduced rates in September 2012 (Table 4.1 and Graph 4.5). There were regulatory changes affecting the rate in 2020: type 0 on essential medical supplies to combat COVID 19 and super-reduced rate on books, newspapers and digital magazines. But its impact, valued at a loss of 301 million (Table 1.5), was not enough to significantly influence the evolution of the average rate.

Consequently, the VAT accrued in the period decreased by 13.6%, three tenths more than the subject expense. 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) fell a little less, by 13.4%.

Gross accrued VAT decreased by 10.8% (Table 4.2), showing a smaller deceleration than that recorded by net accrued VAT. Thus, in 2020 the gross VAT / accrued VAT ratio increases compared to the ratios observed in the previous five years, a period in which they remained stable, since Customs VAT began to be settled in 2015 through self-assessments (Graph 4.3).

The drop in gross accrued VAT was more intense in the quarterly returns, associated to a greater extent with activities most affected by the slowdown in activity and consumption: from 3.8% in 2019 to -11.5% in 2020. For their part, monthly declarations, which group together Large Companies, groups and other operators covered by the monthly refund and import VAT regime, decreased by 10.4% (3.4% in 2020).

Gross income fell 9.4%, almost a point and a half less than the gross VAT accrued. There are several reasons that explain this smaller decline. On the one hand, the mechanics of the tax itself, which shifts the income from quarterly returns corresponding to the accrual of the last quarter of 2019 (not affected by the COVID-19 crisis) to the first quarter of 2020, to which is added that, since the SII came into force, most monthly returns shift their cash income two periods. That is, almost all of the income for the first quarter of 2020 corresponds to accruals from 2019. And part of the revenues for the second quarter of 2020 are associated with accruals not yet affected by COVID. This gap between the accrual to be paid (not including deferral requests) and the recording of its cash income can be clearly seen in Chart 4.4, which shows the different quarterly evolution of both series, and explains why the annual fall of the former reached 11.9%, compared to -10.7% of income (Table 4.2; chart data can be downloaded from this link ).

The other reason for the smaller drop in gross revenue is the significant increase in revenue linked to the higher deferral requests (13.6%).

Refund applications were also affected by the economic environment, falling by 2.9% in 2020 due to a decrease in monthly applications (more related to exports), which after three years of average increases of close to 7%, fell by 4.4%. Meanwhile, annual refund requests (more closely linked to the reduced rates at which smaller companies sell) grew by 2.9% (Table 4.2).

VAT refunds fell by 4.1% in 2020 (-1.3% for annual refunds and -3.1% for monthly refunds). The drop in annual refunds is due to the lower amount requested in 2019, most of which was paid in 2020, with a higher rate of completion than that achieved in the previous year. In the case of monthly refunds, the decrease is explained both by the lower amount requested in the 2020 financial year, coupled with a slower pace of completion, and by the lower amount paid in the 2019 financial year, following the advance in the payment of these requests reached the previous year. Refunds from tax adjustments also fell significantly (-16.3%), affected by the halt in activity.