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4. Value Added Tax

VAT collection increased by 14.5% in 2021, reaching 72,498 million, and stood at 1.3% above the amount paid in 2019.

The improvement in the subject expenditure was reflected in the positive evolution of gross VAT, which grew by 11.9% (Table 4,2), exceeding the amount reached in 1.4 by 2019%. Naturally, much of the evolution of gross income is strongly conditioned by the 2020 trajectory. Thus, the year began with a growth of 3.2%, followed by a sharp upturn in the second quarter, in response to the months of strict confinement in 2020, but even with this intense growth, by the middle of the year the level of income of two years had not yet been reached before. In the second half of the year, the growth in gross income accelerated, which allowed the year to close with income of almost 5,000 million euros higher than in 2019. Part of this recovery was related to the price increase that took place during that period, especially in the last few months of the year ( chart 4,1), although it should be noted that the reduction in the rate of domestic electricity consumption, which fell by more than 500 million euros to the collection, partially cancelled the increase in prices. The growth in gross revenues was accompanied by the low increase in refunds made, which grew by 6%. It should be recalled that most of the refunds paid in 2021 (around 55%) are not related to what happened in the year, as they correspond to refunds requested in other financial years or foral adjustments. These refunds increased by 7.1%. In addition, the effect of rising prices at the end of the year, and the resulting increase in costs resulting from a rapid increase in refund applications during that period, it was mostly transferred to 2022, which is when the last accruals of 2021 were filed.

Chart 4,1. Variation rates in% of the final expenditure subject in current terms, in constant terms and deflator.

Final expenditure subject to VAT increased by 19.3%, in line with the general improvement of the economic context. After the sharp recovery of the second quarter, the response of the contraction suffered in the same period of 2020, recorded a significant acceleration in the second half of the year, part of which was due to the aforementioned price increase (3.3% annually, Table 4,1 and Chart 4,1).

Household consumption expenditure was the most intense recovery (21.8%), after being the most affected by the pandemic. The usual synchronization between the changes in gross household income and consumption expenditure was broken last year as a result of the confinement and other limitations that severely affected this component. In 2021, the spread between the two was further increased, so while the gross household income grew by 5.9%, their consumption spending recovered to 21.8% (17.7% without the effect of the price increase). If the comparison is made with the levels of 2019, this differential is narrowed: Gross household income grew by 5.5% while spending grew by 1.2% (Chart 4,2). However, the recovery of household consumption expenditure was not enough to recover its weight over the total of the expenditure subject, leaving even more than one point and a half below the average observed in the previous four years (Graph 4,3). New housing expenditure also experienced an intense recovery (16.4%, 11.2% compared to 2019), in line with the recovery of new housing transfers. Finally, the expenditure of the public administrations It maintained the upward trend, with growth of 7.1%, as it remains conditioned by the greater disbursement associated with dealing with the effects of the pandemic.

Chart 4,2. Rates of variation in% of gross household income and household consumption.

Chart 4,3. Contributions to the growth of the final expenditure subject to VAT, of its components: Households, public administrations and housing.

The effective rate of VAT remained practically unchanged for one more year (- 0.1%, Table 4,1 and Chart 4,5). In 2021, there were several regulatory changes that affected the type: The rise in the VAT rate on sweetened and sweetened beverages, the reduction of the VAT rate on electricity and surgical masks, the maintenance of type 0 in essential health material to combat and the extension to vaccines and PCR. 19 All these averages had an impact valued at a loss of 186 million (Table 1,5), which was not enough to have a significant impact on the average rate.

What has been clearly affected by the pandemic has been the composition by the types of the final expenditure subject, as analysed in Table 8,7. Thus, while in the period 2014 to 2019 the weight of the general expense over the total of the final expenditure subject was maintained at around 57%, this weight increased to 2020% in 58.7, while the weight of the reduced rate expense (associated with others with the sectors most affected by the lockdown measures and other limitations), fell three points, moving from representing around 34.3 % of the total amount of the subject to be 31.3% (Chart 4,4). It is expected that this situation will have been partly reversed during 2021 (information available at the end of 2022).

Chart 4,4. Weights in% of the final expenditure subject to the expense according to VAT rates.

In view of the practical stability of the cash rate, VAT accrued in the period increased by 19.2%. Net accrued VAT (which differs from the previous one because it includes the variation in the balance that companies stop compensating from one year to another) grew a little less, 19%, 3% compared to 2019.

Gross accrued VAT increased by 17.8%, 5% if compared to 2019 (Table 4,2). Just as its deceleration in 2020 was somewhat less abrupt than that recorded by net accrued VAT, the recovery in 2021 it was also somewhat lower, reducing the gross VAT/net VAT accrued ratio, although this ratio does not reach the environment of those observed since 2015 (the year in which Customs VAT was settled through self-assessments) until the start of the pandemic (Chart 4,6).

Chart 4,6. Ratio on the net accrued tax of gross accrued VAT and refund applications.

The acceleration of gross accrued VAT was more intense in the quarterly tax returns (18.6%), which are those with a greater link to the activities that were most affected by the drop in activity and consumption in 2020. Monthly returns, which group together Large Companies, groups and other operators under the monthly repayment regime, together with import VAT, increased by 17.3%.

Gross income increased by 11.9%, almost six points less than gross accrued VAT (17.8%), and this despite that the part of this VAT declared to be paid grew even more (19.4%, Table 4,2), which was favored by the improvement of the economic situation that caused the amount of the deferral applications to be reduced and the impossibility of payment to be made. There are two reasons why this lower increase in cash deposits is explained. On the one hand, the tax's own mechanics, which means that virtually all the income from the first quarter of 2021 corresponds to income from the end of 2020, affected by mobility limitations and other restrictions. Thus, the quarterly tax returns corresponding to the accrual of the last quarter of 2020 are deferred to the first quarter of 2021, which is added that since the entry into force of the SII, most of the monthly tax returns have been paid in cash for two periods. Similarly, most of the income associated with VAT accrued in the last quarter of 2021 (which recorded a significant acceleration in line with the aforementioned evolution of the expenditure subject in real terms and prices), it has moved to the first quarter of 2022. Chart 4,7 shows this gap between the accrual to be paid (excluding deferral applications) and the posting of its cash deposit , which explains that the first recorded an annual increase of 19.4%, compared to 13.6% of income (Table 4,2; The chart details can be downloaded at this link).

Chart 4,7. % Variation rates of the gross VAT accrued and of gross VAT paid on self-assessed income and Customs.

The second cause of lower gross income is the drop in the collection associated with the lower requested deferrals (- 10.9%; Other income in Table 4,2). It should be noted that last year this concept had a very high level due to the deferred payment measures taken at the beginning of the pandemic. In 2021 the amount recorded is the same as that observed before 2020.

Refund applications increased by 14.4%, following the decline of around 3% last year. Annual refund requests, which are more linked to the reduced rates sold by smaller companies, increased 17.0%, driven by cost growth, while monthly, more related to exports, grew by 13.7%, a rate that almost doubles the average increase observed in the period 2017-2019.

VAT refunds grew by 6% in 2021, with progress of around 2% both in annual and monthly refunds and strong recoveries of foral adjustments (45%, more than 1,100% above those paid in 2020). The increase in annual refunds is due to the highest amount requested in 2020, most of which were paid in 2021, and added a high rate of realisation (we must go back to 2008 to find a higher performance rate). Meanwhile, in monthly refunds, the increase is explained by the highest amount requested in 2021, since the pace it was approximately 6% less than the figure recorded in the previous five years, and it is added that the amount paid for in 2020 also decreased.