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3. Corporation Tax

In 2021, Corporation Tax revenues increased by 67.9%, a very high rate, as was the drop in 2020 (- 33.2%) and that is due to the same reasons. In 2020, most of the decrease was due to the drop in payments split due to the decrease in activity due to the pandemic, and in 2021, most of the growth was due to the increase in payments in instalments (53.7%). However, the figure is also good if compared to 2019 (12.2% higher). Income benefited from some extraordinary transactions; If this is taken into account, payments would remain above 2019 (3.1%). The other element that explained the decrease in 2020 and the rise in 2021 were the refunds made. In 2020 they reached a very high level because the refunds requested for 2018 had been. It was a one-off event that was not repeated in 2019, so in 2021 the refunds made were much lower.

The consolidated tax base of Corporation Tax grew by 26.7% in 2021 (Table 3,1). The rate is calculated against very affected amounts due to the impact of the pandemic, which is why the comparison with 2019 is more informative. In this case, the increase is estimated at 4.7%. Profits grew by 32%, largely in response to the sharp decline in 2020, but also due to the contribution of some extraordinary operations (a banking merger and the sale of assets from a large company). Compared to 2019, profits in 2021 still remained 6.8% below those of that year. The information declared in the instalment payments (Table 3,2) indicates that the increase in profits and the gross tax base was greater in groups (even if the impact of the merger and sale of assets is eliminated) than in Large Companies and SMEs that they declare according to the profit of the period.

In a broader perspective, such as the one that allows Chart 3,1, it can be seen that, although the maximum profit for 2019 has not been reached, the results of 2021 were better than those of any other year in the historical series. You cannot say the same as the tax base or the tax accrued. A more detailed analysis of this process that has been experiencing the tax for years can be carried out with the information provided by Table 8,5.

Chart 3,1. Evolution of the profits of companies, taxable income and tax accrued in Corporation Tax (base 2007 = 100).

The effective rate on the gross tax base rose 4% on the estimated rate for 2020 (Table 3,1; Chart 3,5). If the rate is calculated on the profits, the result is almost the same as the previous year (9.15% compared to 9.17% in 2020). The variation in rates is an almost exclusive consequence of the different growth estimated for bases and rates in the different groups of companies. The only significant regulatory change with impact (the limitation to the exemptions from external income of article 21 of the law) slightly raised the rate in the group of companies concerned, although its importance in the whole is less significant.

Corporation Tax accrued grew by 31.8% (Table 3,1), a figure close to the growth estimated for profits. The sharp increase observed in instalment payments (50.4%) is not transferred directly to the tax because part of that growth translates into a more negative differential payment. This payment is estimated (the deadline for filing for most taxpayers ends at the end of July), but it already includes the impact on the same of the fact that a relevant part of the payments will be made of the minimum payment (which is calculated on the result and not on the taxable base). Chart 3,2 shows this effect: When the minimum payment contribution exceeds 20%, the refund applications stand at over 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 taxable base, so that in the end, these payments only entail greater refunds, but not a greater tax. As can be seen in Chart 3,3, this evolution means, in terms of distribution between payments and withholdings, returning to a situation similar to that recorded before 2020.

Chart 3,2. Relationship between the contribution of the minimum payment on the total of the instalment payments and refund requests in the annual Corporation Tax return.

Chart 3,3. Percentage of the total tax accrued on instalment payments and withholdings and the differential payment.

The reasons for the exceptional increase in instalment payments (Table 3,2) are two: The good performance of the terms and conditions and the greater contribution of the minimum payment. By type of taxpayer, the greater increases were observed in the groups (even without the impact of the two extraordinary operations) that almost doubled (92.8%) the payments of 2020, although they were also the ones that recorded the greatest decline at that time. Compared to 2019, payments would be 20.3% higher than those of that year (Chart 3,4), and filtered from atypical sources by 3.1%. In Large Companies payments grew by 22.3% (2.8% more than in 2019). In SMEs, growth was 9.6%, reaching a level of 4.4% higher than in 2019. It should be recalled that part of these payments are not linked to profits, but are calculated with the previous year's payment, in this case of 2020 and therefore barely grew (0.7%) and its level is even lower than in 2019 (- 1.3%). In the rest of the SMEs, those that pay according to the profit of the period, payments behaved like the rest of the companies that declare according to the results of the financial year (39.4% compared to 2020 and 21.3% compared to 2019).

Chart 3,4. Amounts and rates of variation of the instalment payments of companies according to the type of company.

Cash deposits grew by 67.9% (Table 3,1). This rate does not allow us to correctly assess what the recovery was in 2021 because we must remember that in 2020 the fall was very large (- 33.2%) and not all of it for economic reasons (around 10 points were explained by the management of refunds). For this reason, it is better to make comparisons with 2019. In this case, it is concluded that the 2021 collection was 12.2% higher than that of that year. This growth includes the impact of the extraordinary corporate operations already mentioned and which contributed some 2,000 million additional income not linked to the normal evolution of profits. Without counting these additional income, the collection would also be higher than the two years before, but only 3.8%.

In 2021 there was a great difference between cash deposits and accrued tax (67.9% compared to the 31.8% previously seen). The main reason is the different way in which the annual tax return results are accounted (in cash at the time of the revenue or refunds; In accrual in the year of the same). This difference, which is given every year, is accentuated when the amount of refunds is high (as we have just seen in the previous paragraph) and, related to this, when, as in 2021, the minimum instalment payment is high (with the consequences indicated on previous pages). The "cash accrual step" section of Chart 3,5 clearly expresses these differences.

Most of the growth in the tax in 2021 is explained by the evolution of the instalment 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 atypical figures 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 one collected most of the interruption of the activity. Thus, strong growth in the first and second payment in 2021 and more moderate in the third party could be observed.

Another part of the tax's growth was the result of the lower refunds made. As already noted, in 2020 these refunds reached a very high amount (more than 11,500 million only those of the annual tax return). In 2021 these refunds returned to a figure that was more in line with what they were in previous years (8,629 million; 8,604 In the average for the period 2017-2019). The positive effect of these lower refunds was slightly offset by the gross annual income, which, as the 2020 financial year was 6.7%.