2. The Personal Income Tax

personal income tax income grew by 15.8% in 2022, reaching 109,485 million, almost 15,000 million more than the previous year, close to half of the growth in total income. The reasons that explained the increase were the increase in employment (particularly in the private sector), the increase in average salaries and pensions, and the resulting effective rate. To these factors, we must add the good results of the 2021 annual declaration presented at the end of June 2022 and the growth in profits of personal companies.

The gross income of households grew by 8.1% ( Table 2.1 ), two points more than the previous year. All its components improved, with the exception of unemployment benefits and capital gains (which in 2021 were already in figures only below the highs of 2006 and 2007). Growth was especially intense in private incomes, around 11% for the second consecutive year. For its part, public income showed a somewhat more moderate increase, limited by lower unemployment benefits, with an increase of close to 8% in pensions and around 5% in public salaries.

The main component of household income, labor income, grew by 7.0% in 2022 (4.2% in 2021, Table 2.1 ). Among its main components, the growth of salaries and pensions was greater than that achieved a year earlier, while unemployment benefits decreased due to both the lower number of unemployed people and the decrease in the average benefit. The evolution of the wage bill in the private and public sectors was very different: in the first case it increased by 10.5%, while in the second it only increased by 4.7% ( Table 2.2 ).

In the private sector, two parts of the year can be clearly distinguished (Graph 2.1). In the first, when the comparison was still made with periods affected by restrictions on activity, the good performance of employment allowed increases of around 12.6% to be recorded. In the second, the gradual slowdown in employment slowed the growth of the wage bill (in the fourth quarter the increase was only 7.6%). Average incomes, on the other hand, showed the opposite profile, with greater increases as the year progressed. The profile was similar in Large Companies and SMEs, although the slowdown in the wage bill was greater in the latter (Graph 2.2), also a consequence of the comparison in the first part of the year with periods with restrictions that affected more small businesses.

The wage bill in the public sector, for its part, grew by 4.7%, a similar rate to that recorded a year before, although for different reasons. In 2021, the increase was based on the greater increase in employment, while the average performance remained relatively stable, affected precisely by the entry of new employees with lower average salaries. However, the main reason for the increase in the wage bill in 2022 was the higher average salaries. And, unlike what was observed in the private sector, in this case the growth rate of the wage bill increased moderately throughout the year, from 3.2% in the first quarter to 3.8% in the first quarter. third, rising to 8% at the end of the year, when the additional payment was introduced in the last quarter to compensate for the rise in prices (Graph 2.3).

Finally, public pensions maintained growth of around 6.8% throughout the year, after the strong increase in the first quarter due to the compensatory payment received in January for the price deviation in 2021. The average pension grew by 6.6%, an increase that has its origin in the recovery of the loss of purchasing power of the previous year, in a greater annual increase ( Table 2.2 and Chart 2.4) and, as usual, in the upward effect resulting from the incorporation of pensioners with average pensions higher than those who were already in the system.

It is estimated that in 2022, household capital income as a whole (furniture, rentals and capital gains) grew by 12.3%, equaling the increase estimated for 2021 and already exceeding pre-pandemic levels ( Tables 2.1 , 2.4 , 2.5 and 2.6 ), although not yet The weight that these incomes represented then on the total gross income of households has been reached (Graph 2.5).

As usual, very different behaviors are observed between the different types of assets. After falling 2.5% in 2021, movable capital income grew by more than 27% in 2022 (Chart 2.6), thanks to the good performance of its main component, dividends, which increased just over 37%, after two years of falls. It stands out, not so much for its amount, but for the breaking of a trend that has lasted for many years, the gradual recovery of interest on bank accounts, in response to the new interest rate situation. Despite this intense progress, the level reached in 2022 by movable capital income was still slightly below that observed before the pandemic.

The positive evolution of capital income was also contributed by the increase in income from the rental of real estate (14% compared to the previous 3.8%), which has been, since 2015, the ones with the greatest weight on the total. of capital income. In fact, its importance in overall household income has been growing (with the exception of the decline caused by the pandemic). The recovery of these rents was especially intense in 2022, observed both in the leases of premises (which are subject to withholding) and in those of homes. Despite this, they have not managed to equal the weight they represented in total household income before the pandemic (Graph 2.7).

For its part, equity gains grew by 1.9% over the already very high figure for 2021 (in that year the growth was almost 35%). Part of this moderation has to do with the profits linked to investment funds, which were reduced by 20.6% after the strong growth in the final stretch of 2021. Regarding the income of personal companies, it is estimated that they increased by 16.8% in 2022, very high growth, even more so if the good result they showed in 2021 is taken into account (31%, Table 2.8 ), when they managed to greatly exceed pre-2020 levels. As is the case with private salaries, the profit of these companies grew more intensely in the first half of the year, as they were highly concentrated in activities that were especially affected by the restrictions associated with the pandemic and that lasted until the first half of 2021. The disappearance of this comparison effect, as well as the slowdown in activity, meant that progress was smaller in the last part of the year. However, the annual growth remains high when compared to the average increase observed in previous years (in the period 2013-2019 it was around 6%; in 2019 it was 2.6%).

Regarding the income of personal companies, it is estimated that they increased by 16.8% in 2022, very high growth, even more so if the good result they showed in 2021 is taken into account (31%, Table 2.8 ), when they managed to greatly exceed pre-2020 levels. As is the case with private salaries, the profit of these companies grew more intensely in the first half of the year, as they were highly concentrated in activities that were especially affected by the restrictions associated with the pandemic and that lasted until the first half of 2021. The disappearance of this comparison effect, as well as the slowdown in activity, meant that progress was smaller in the last part of the year. However, the annual growth remains high when compared to the average increase observed in previous years (in the period 2013-2019 it was around 6%; in 2019 it was 2.6%).

The effective rate on household gross income increased by 4.6% ( Table 2.1 and Chart 2.9). The increase in the rate was due to the increase in average income in salaries and pensions, in turn caused by the revisions derived from the inflationary process that began at the end of the previous year and, in the case of pensions, by the incorporation of new pensioners in the system with the highest average pensions. Furthermore, the loss of importance of unemployment benefits, which have almost zero average rates, continued, which also pushed up the total effective rate.

Personal income tax accrued grew by 13% in 2022 ( Table 2.1 ) after increasing by 11.9% in 2021. Such a high rate had not been recorded since 2006. This increase is the result of the increase in bases by 8.1% and the rate by 4.6%.

Withholdings on income from work and economic activities grew by 12.4% ( Table 2.3 ). This positive evolution was supported by the good performance of rents, which increased by 7.3% and the increase in the effective rate by 4.7% (Graph 2.10). The importance of both factors, however, varies depending on the retention being analyzed. Thus, the main cause of salary withholdings growing by 11.6% was the 9% increase in the wage bill. The increase was once again greater in private sector withholdings (13.6%), with strong increases in both Large Companies (12.6% compared to 5.1% in 2021) and SMEs (15.7% , rate similar to that achieved the previous year). Withholdings on salaries in the public sector grew somewhat less, 7%, due to a more moderate growth in the wage bill (4.7%). The increase in the rate explains about three points of the increase in withholdings in the case of private salaries and around two points in public salaries. For its part, in pensions the increase in the rate was around 9%. This, together with the increase in rents, caused withholdings to grow by 17% during the year.

Regarding withholdings to the company, both installment payments and withholdings on economic activities increased for the second year at a good pace (17.7% for the former and 10.9% for the latter), thanks to the positive evolution of the profits of personal companies.

Withholdings on capital income grew by 17.6%, ( Table 2.1 ). The increase was especially intense in withholdings on movable capital income (27.2%), but it was not enough to recover the level reached in 2019. Withholdings for leases, mainly for premises, rose by 11.5%, more than double the rate recorded the previous year, already equaling the level recorded in 2019. For its part, withholdings derived from capital gains from investment funds fell by 20.6%, after the intense growth experienced in the previous two years.

personal income tax income increased by 15.8% (compared to 7.5% in 2021), a rate that exceeds that achieved by accrued taxes by almost three points, thanks to the good result of the annual declaration associated with the 2021 financial year and entered in 2022. The positive quota increased significantly (25.4%) due to the growth of income not completely subject to withholding or payment on account (income from business activities and capital gains), in addition to the effect of regulatory changes (increase in rates on the savings base and modification of the limits on contributions to pension plans) approved in the 2021 PGE. Income from withholdings on income from work and economic activities grew by 12.6%, doubling the rate achieved the previous year. The increase in the private sector was somewhat greater than in the public sector (12.9% and 11.7% respectively). Within the first, it was the income associated with SMEs that had a more dynamic behavior, with an increase of 17.3% compared to 10.7% for Large Companies. It should be noted that the shift to cash had a different impact depending on the type of company. Thus, the income of Large Companies grew two points below their accrued withholdings, as those corresponding to December 2022 were moved to 2023, which performed better than those associated with December 2021 and collected in 2022. And the opposite occurs with SMEs, where the income associated with the accrual of the last quarter of 2021 and entered in 2022, was higher than that linked to the accrual of the last period of 2022, which was carried over to the following year.

In the income from withholdings of the AA.PP., those from salaries grew by just over 6%, while those from pensions rose to 18.3%. As already mentioned, in salaries, the growth of the average salary increased as the year progressed, this trend becoming more acute in the fourth quarter, when additional pay was collected to compensate for the rise in prices. The increase in the average rate derived from the higher average salary, together with the growth in employment, configure the growing profile of income from withholdings on public salaries. In pensions, on the contrary, collection was higher in the first quarter, when collecting the income associated with the compensatory pay for the price deviation in 2021. After the strong record in the first quarter, these withholdings maintained high rates throughout the year, a consequence of the higher average pension and the consequent rise in the effective rate.

The second element that explains the positive evolution of personal income tax collection was the high growth experienced in annual tax return income, which contributed some 3.3 billion more than the previous year. The reasons for this result are two: the effect of the regulatory measures (increase in rates on the savings base and modification of the limits on contributions to pension plans, which together amounted to 691 million, preferentially affecting taxpayers with a positive differential rate) and higher growth in income not subject to withholding and in the upper sections of the distribution. Regarding returns, those linked to the annual declaration decreased by 1.6% and, within these, those associated with refund requests from the 2021 Income Campaign fell by 2.4% compared to those linked to the campaign former.

As already happened in 2021, the good performance of SMEs in 2022 was also observed in the installment payments of personal companies, which grew by 21.7%, exceeding the income of the previous year by 716 million. This record is quite remarkable, especially if you take into account that in 2021 they grew by over 17%, and that in the years in which this variable has had a favorable evolution, the increases compared to the previous year were around 200 million.

Income associated with withholdings on capital grew by 9.5%, well below the withholdings accrued, weighed down by lower income from dividends associated with the accrual of December 2021 and received in 2022. The growth in income in 2021 and 2022 was not enough to offset the loss suffered in the pandemic, so the level reached by these withholdings in 2019 has not yet been recovered. The same does not happen with income from withholdings on leases, which after growing by 11.3% in 2022 have already exceeded the pre-pandemic level. For its part, income associated with withholdings on investment funds decreased by 10.8%, after the intense growth recorded the previous year. Despite the decline, they remain at very high levels, since they exceed the average income obtained by this figure in the period 2014-2020 by around 400 million (almost 73% more).

Finally, it should be noted that in 2022 what used to be the usual pattern of the annual settlement of the Appropriation to the Catholic Church was again broken. Said settlement was usually made in January for the outstanding balances of the declaration from two years earlier. However, the payment for 2021, which should have been paid in January 2023, was brought forward to December 2022. Furthermore, in 2021 the returns associated with the Allocation to the Catholic Church were lower than normal, since the settlement corresponding to 2019 was also brought forward to December 2020. The consequence of both movements was that returns for this concept in 2022 exceeded those made a year before by more than 240 million, negatively affecting income.