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3. Corporate Tax

In 2021, income from Corporate Tax increased by 67.9%, a very high rate, as was the drop in 2020 (-33.2%) and which responds to the same reasons. In 2020, most of the decrease was due to the fall in installment payments due to the decrease in activity due to the pandemic and in 2021, most of the growth was due to the increase in installment payments (53.7%). . However, the figure is also good if compared to 2019 (12.2% higher). Revenues benefited from some extraordinary operations; If this is taken into account, payments would continue to be above 2019 (3.1%). The other element that explained the decrease in 2020 and the increase in 2021 were the returns made. In 2020 they reached a very high level because the returns requested for the 2018 financial year had been high. It was a specific event that was not repeated in the 2019 financial year, so that in 2021 the returns made were of a much smaller amount.

The consolidated tax base of Corporate Tax grew by 26.7% in 2021 ( Table 3.1 ). The rate is calculated against amounts greatly affected by the incidence of the pandemic, making the comparison with 2019 more informative. In this case the increase is estimated at 4.7%. Profits, for their part, grew by 32%, largely in response to the intense decline in 2020, but also due to the contribution of some extraordinary operations (a bank merger and the sale of assets of a large company). Compared to 2019, profits in 2021 were still 6.8% below those of that year. The information declared in the installment payments ( Table 3.2 ) indicates that the increase in profits and tax base was greater in the groups (even eliminating the impact of the merger and sale of assets) than in Large Companies and that in SMEs that declare according to the profit of the period.

In a broader perspective, such as that allowed by Graph 3.1, it is observed that, although the maximum profits of 2019 have not been reached, the results of 2021 were better than those of any other year in the historical series. The same cannot be said of the tax base or the tax accrued. A more detailed analysis of this process that the tax has been experiencing for years can be carried out with the information provided in Table 8.5 .

Graph 3.1. Evolution of corporate profits, tax base and tax accrued in Corporate Tax (base 2007=100).

The effective rate on the tax base rose 4% over the estimate for 2020 ( Table 3.1 ; Graph 3.5). If the rate is calculated on profits, the result is a rate almost the same as 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 impact (the limitation on foreign income exemptions in article 21 of the law) slightly raised the rate in the group of affected companies, although its importance as a whole is less significant.

Corporate Tax accrued grew by 31.8% ( Table 3.1 ), a figure close to the growth estimated for profits. The strong increase observed in installment payments (50.4%) is not directly transferred to the tax because part of that growth translates into a more negative differential fee. This fee is estimated (the deadline for its submission for most taxpayers ends at the end of July), but it already includes the impact that the fact that a relevant part of the payments came from the minimum payment (which is calculated on the result and not on the tax base). Graph 3.2 shows this effect: When the contribution of the minimum payment exceeds 20%, refund requests are above 9,000 million. As is well known, the explanation for this fact is that the companies most affected by the payment usually have a low or zero tax base, so that, in the end, these payments only mean greater refunds, but not a greater tax. As can be seen in Graph 3.3, this evolution means, in terms of distribution between fees and payments and withholdings, returning to a situation similar to that recorded before 2020.

Graph 3.2. Relationship between the contribution of the minimum payment on the total of the installment payments and refund requests in the annual Corporate Tax declaration.

Graph 3.3. Percentage of the total tax accrued from fractional payments and withholdings and the differential fee.

The causes of the exceptional increase in installment payments ( Table 3.2 ) are two: the good performance of the bases and the greater contribution of the minimum payment. By type of taxpayer, the largest increases were observed in the groups (even without the impact of the two extraordinary operations) that almost doubled (92.8%) the 2020 payments, although they were also the ones that registered the greatest drop then. Compared to 2019, payments would be 20.3% higher than those of that year (Graph 3.4), and 3.1% after removing atypical ones. In Large Companies, payments grew by 22.3% (2.8% more than in 2019). In SMEs, growth was 9.6%, reaching a level 4.4% higher than in 2019. It must be remembered that part of these payments are not linked to profits, but are calculated with the previous year's quota, in this case 2020, and, therefore, they barely grew (0.7%) and their level is even higher. lower than in 2019 (-1.3%). In the rest of the SMEs, those that pay according to the profit of the period, the payments behaved like the rest of the companies that declare according to the results of the year (39.4% compared to 2020 and 21.3% compared to 2019 ).

Graph 3.4. Amounts and variation rates of fractional payments of companies depending on the type of company.

Cash receipts grew by 67.9% ( Table 3.1 ). This rate does not allow us to make a correct assessment of what the collection was in 2021 because we must remember that in 2020 the drop was very large (-33.2%) and not all of it for economic reasons (around 10 points were explained by returns management). Therefore, it is better to make comparisons with 2019. In this case, it is concluded that the 2021 collection was 12.2% higher than that year. This growth includes the impact of the extraordinary corporate operations already mentioned and which contributed some 2,000 million in additional income not linked to the normal evolution of profits. Without taking into account these additional income, collection would also be higher than that of two years before, but only 3.8%.

In 2021 there is a large difference between income in cash terms and the tax accrued (67.9% compared to 31.8% seen previously). The main reason is the different way in which the results of the annual declaration are accounted for (in cash at the time the income or returns are made; accrual in the year thereof). This difference, which occurs every year, is accentuated when the amount of refunds is high (as just seen in the previous paragraph) and, related to this, when, as in 2021, the minimum installment payment is high ( with the consequences that have been pointed out in previous pages). The “transition from accrual to cash” section of Chart 3.5 clearly expresses these differences.

Most of the tax growth in 2021 is explained by the evolution of installment payments. Payments increased by 53.7% (-27.1% in 2020). The final payment figure was 12.2% higher than in 2019 (3.1% if the aforementioned atypicalities are taken into account). The profile in the year was a reflection of what happened in 2020, in which the initial weeks of confinement had a strong impact on the first payment and the second collected most of the interruption in activity. Thus, strong growth in the first and second payments could be observed in 2021 and more moderate growth in the third.

Another part of the tax growth was a consequence of the lower refunds made. As has already been noted, in 2020 these returns reached, for various reasons, a very high amount (more than 11.5 billion just those from the annual declaration). In 2021, these returns returned to a figure more in line with what they were in previous years (8,629 million; 8,604 on average for the period 2017-2019). The positive effect of these lower returns was slightly offset by the gross income of the annual declaration which, being for fiscal year 2020, showed a decrease of 6.7%.