Effective rates

The effective rate income and expenditure in 2021 is estimated to have been 15.3%, an increase 1.8% over 2020 ( Table ). The estimate is provisional until the end of 2021 with the annual declarations of personal income tax and corporate tax, which will be known, for the most part, between June and July. According to the information available, the average rate has recovered the upward trend it was following before 2020 (Chart 1.21) and has reached the maximum level it had already had in 2014, the year before the last major reform in indirect taxation. It should be remembered that the upward trend is fundamentally a consequence of the continuous growth in the effective rate of household income. In 2021, this trend was further accentuated by the increase in the effective rate on the base observed in the Corporate Tax. Unlike what happened in 2020, in 2021 regulatory changes were introduced that affected the rates (among others, the increase in rates in the general and personal income tax savings bases for the highest incomes, the limitation on the exemption of income from abroad in the Corporate Tax, the increase in VAT rates for sugary and sweetened beverages and the reduction in VAT rates on domestic electricity consumption and in the Special Tax on Electricity), although its importance in the variation in effective rates was relatively low. Other effects weighed more, as a consequence of the changes that had occurred in the composition of the bases in 2020 (higher unemployment benefits, lower spending on services at reduced VAT rates,...).

In personal income tax, the effective rate rose to 13.2%, 3.2% more than in 2020, a year in which it had practically remained the same as in 2019 ( Table 2.1 ). The increase was basically due to three elements: the regulatory changes with the increase in the rate on the general and savings base for higher incomes (2 points on the state rate from 300,000 euros in the first case and 3 points from 200,000 euros in the second) and the modification of the limits on the reductions linked to pension plans; the increase in the pension rate (due, above all, to the usual sliding effect towards higher average pensions by new pensioners entering the system); and the loss of importance in 2021 of unemployment benefits, with average rates almost zero, and which in 2020 had lowered the effective rate. The increase in the rate caused by these elements was tempered by the fact that throughout the year the contribution to household income from the salaries of SMEs increased, which, with lower average rates, exerted downward pressure on the effective rate, the opposite of what had happened the previous year.

The effective rate on the taxable base in Corporate Tax was 21.4% in 2021, 4% higher than that estimated for 2020 ( Table 3.1 ). If the rate is calculated on profits, the result is a rate almost equal to that of the previous year (9.15% compared to 9.17% in 2020). The variation in rates is almost exclusively a consequence of the different growth estimated for bases and rates in the different groups of companies. The only relevant regulatory change with an impact (the limitation on exemptions on foreign income in article 21 of the law) slightly raised the rate in the group of companies affected, although its importance in the whole is less significant.

The effective VAT rate stood at 15.3%, 0.1% lower than in 2020 and approximately equal to the average of the last six years ( Tables 1.3 and 4.1 ). In 2021, there were significant changes to the tax with the increase in the rate from 10% to 21% for sweetened and sugary drinks, included in the 2021 Budget, and the reduction from 21% to 10% of the rate applicable, basically, to domestic electricity consumption, in force since the end of June, which were added to measures inherited from RDLs 15, 34 and 35 of last year that regulated the 0 rate on COVID products and vaccines and the super-reduced rate on masks. However, all these changes did not translate into a variation in the aggregate rate. In addition, expenses were recovered with reduced rates (such as those in the hotel and catering industry), which were greatly affected by the limitations on activity in 2020, and in the second half of the year there were strong increases in the prices of some products that are subject to the general rate (such as fuels).

The average effective rate of excise taxes, calculated as the proportion of the tax accrued in relation to the value of consumption, fell by 10.6%, falling to its lowest level since 2014. As noted in all reports, this rate is included only for the purpose of completing the analysis of bases, rates and income, but it is not the rate that is applied (in several figures the base is made up of physical consumption and only in two -tobacco and electricity- the value is important). Furthermore, in the absence of regulatory changes, this effective rate moves in the opposite direction to the prices of energy products, which determine the value of consumption. In 2019 and 2020, these prices decreased, leading to an increase in the rate, and in 2021 they increased sharply, leading to a sharp decline in the rate.