4. The tax over the value added

In 2023 income from VAT grew by a moderate 1.6%, to 83,909 million. Subject final expenditure grew by 7.1%, but the impact of regulatory and management measures (rate reduction, but also modification of the conditions in requesting deferrals) meant that the increase in expenditure did not translate into higher income. . ( Table 4.1 ).

There are two main features to highlight in the evolution of income in this tax in relation to 2022, a year in which income grew by almost 14%. On the one hand, subject spending, although it grew at a high rate compared to the rates observed before 2020 (between 2014 and 2019 the average was 4.8%), suffered a notable slowdown compared to the previous year, related, above all, with the progressive relaxation of inflationary tensions that had been so acute in 2022 (Graph 4.1). On the other hand, it must be remembered that the tax was significantly affected by the rate reductions on basic food, the additional reductions applicable to electricity consumption in contracts with contracted power less than 10 kW and the consumption of natural gas, in addition to the reduction of the rate on feminine hygiene products and contraceptives. These reductions subtracted 2,452 million from income ( Table 1.5 ), further exacerbating the profile of income deceleration (Graph 4.2). Discounting the effect of these impacts, revenues would have grown by 4.6%. If the incidence of other factors such as the change in the deferral regulations and the existence of extraordinary refunds were also discounted, which would raise the lost income to more than 3,000 million, the growth would amount to 5.3%, more consistent with the evolution of the spending, and even more so if one takes into account that rate reductions have an immediate impact on gross income, but a delayed impact on the refunds made.

The final expense subject to VAT closed the year with a growth of 7.1%, which represented a loss of almost nine points compared to the estimated rate for 2022 ( Table 4.1 ). Part of the slowdown in nominal spending had its origin in lower price increases (Graph 4.1), which translated into an increase in the spending deflator of less than 4%, compared to 8.4% in 2022. But there was also a moderation in spending in real terms, with a growth of 3.2%, almost four points less than the previous year, although it must be remembered that 2022 was compared to 2021, which had not yet recovered normality. in all activities (on average for 2022 and 2023, spending growth in real terms is slightly higher than the average for the period before the pandemic).

The notable effect that the inflationary cycle that began in 2021 has had on nominal spending can be clearly seen in Graph 4.3, which shows the evolution of spending based on the year 2015. It is observed how, until 2020, the evolution of spending in current and constant terms showed the same profile, given the moderation of prices at that stage. Thus, in 2020 nominal spending was 4.4% higher than that achieved in 2015, and spending in constant terms was 1.5% higher than that recorded that year. However, starting in 2021, the evolution of nominal spending distances itself from spending in constant terms, so that, while the latter exceeds the amount reached in 2015 by 28.4% in 2023, the increase in the former scales up to almost 54%.

It must be remembered, however, that the impact of prices on spending is not the same as that observed on income for two basic reasons. The first is that not all goods and services included in expenditure are reflected equally in income given the existence of very different types. Thus, the strong growth in prices of goods or services that are at reduced rates directly affects spending, but its effect is cushioned on income. The second is that in recent years measures have been implemented that have lowered rates on products with the highest price increases, so that their impact on income has been reduced or even, as is the case of basic food , cancelled.

From the point of view of the components, household consumption spending, which is the spending group with the greatest weight in the total, was the one that registered the most intense deceleration (7.1% in 2023, 17.2% 2022), followed by spending on home purchases (6.7% compared to 13.3%). The sum of current and capital expenditures of Public Administrations was the component with a relatively more stable profile (Chart 4.4), standing at 7.2% after 9.8% in 2022 ( Table 4.1 ). In 2023, the agreement that used to be observed between the evolution of the gross income of households, which grew by 9%, and their consumption spending will be recovered (Graph 4.5), a harmony that was broken in 2020, when spending was abruptly affected by confinement and other limitations, without benefiting from other factors that cushioned the fall, as was the case of gross household income, favored by the compensating role played by public income (salaries, pensions and other benefits, among them transfers derived from the ERTE ).

It is estimated that the effective rate of the VAT was reduced by 4.4% ( Table 4.1 ) as a consequence of the regulatory changes that affected the type: the rate reduction, from January 1, on food (to 0% on products that were taxed at the super-reduced rate of 4% and from 10% to 5% on oils and pastas), the rate reduction on hygiene products feminine and contraceptives (from 10% to 4%) and the maintenance of the reduction in the VAT rate on electricity, natural gas, wood and pellets (from 10% to 5% from mid-2022).

Table 8.7 shows the breakdown of the subject expenditure by type (the information corresponding to the 2023 financial year will be available at the end of 2024). The weight of general rate expenditure on the total subject final expenditure remained relatively stable at around 57% in the period 2015 to 2019. In 2020 it increased to 58.7%, as did, although to a lesser extent, the weight of super-reduced rate spending, all at the expense of reduced rate spending, linked to the services most affected by confinement measures. and limitations to activity. In 2021, this situation was partially reversed, returning spending at the general rate to a weight similar to that before the pandemic, despite the reduction in the rate, from the general to the reduced rate, in electricity during half of the year and in gas. since October. In 2022, the percentage of spending at the general rate was reduced again to 54.3%, as reduced-rate spending normalized and electricity and gas consumption continued at reduced rates (initially at 10% and since June at 5%). In 2023, still with the reduced rates for electricity and gas, what is expected is a maintenance of the weight of
spending at the general rate.

The VAT accrued in the period grew by 2.4%, more than four and a half points below the subject expense, due to the reduction in the rate derived from reductions in food, electricity and gas. A similar rate is expected for the net VAT accrued (which differs from the previous one because it includes the variation in the balance that companies allow to be offset from one year to the next).

The VAT gross accrued closed the year at practically the same level as the previous year ( Table 4.2 ). After starting with 4% in the first quarter, on the path of gradual slowdown that began in 2022, it fell around 3% in the central quarters and recovered to 2.5% in the final stretch. In Large Companies gross VAT was reduced by 3.3% while in SMEs an increase of 7.3% was observed ( Graph 4.7). The reason for this divergence is in the way in which rate reductions are carried out, especially those related to electricity and gas, activities where Large Companies predominate. At first, the rate is lowered, reducing the gross income of these companies. Subsequently, in the quarterly declarations of the SMEs these lower incomes represent a lower input VAT and, consequently, the income in these other companies increases.

On the other hand, it should be noted that in 2023 the conditions for requesting deferrals were improved. This caused the amounts of gross ## not paid (due to deferral, recognition of debt with a request for compensation or impossibility of payment) to grow by 32.4% (just over 1,700 million) and Therefore, the VAT accrued with the income key was reduced by -1.4%. For the purposes of VAT accrued is a simple redistribution between some keys or others, but it has consequences in the way in which the accrual is transformed into cash by deferring over time part of the income that, Otherwise, they would have been included in the year.

The disparate behavior that occurred between Large Companies and SMEs in gross income was also observed in refund requests, with a decrease in monthly requests of 9.3% and an increase in 10.1% annually. In total, the total amount requested decreased by 5.7%. All of this has translated into a drop in the ratios VAT gross accrued / VAT net accrued and refund requests / VAT accrued net, returning to the levels observed in 2021, after the maximum recorded the previous year, a consequence of the intense rise in energy prices that was passed on to costs, causing a sharp increase in refund requests (Graph 4.8).

revenue in cash terms grew by 1.6%. Gross revenues remained stable in 2023, as did gross accrued VAT ( Table 4.2 ), although the slowdown in collection from self-assessments was higher than in the accrual, especially in the quarterly self-assessments, a fact that has its explanation in the mechanics of the tax itself, due to the transfer of the last accruals to the following year's cash. Thus, practically all of the income for the first quarter of 2023 corresponds to accruals from the end of 2022, with lower growth than the accruals from the last quarter of 2023, most of which income is transferred to the first quarter of 2024. On the contrary, the collection associated with deferrals increased by 11.9%, collecting part of the largest deferrals requested that were entered before the end of the year. It is estimated that the deferred income due to this change and not entered in 2023 amounted to 285 million ( Table 1.5 ).

VAT refunds made fell by 3.8% in 2023, which is low compared to the almost 6% decrease in refund requests. The fall was due to the decrease in monthly prices, which decreased by 6.7%, while annual prices increased by 6.3%. Foral adjustments also decreased (-1.8%, including refunds associated with imports). The decrease in monthly refunds was a consequence of the lower amount requested in fiscal year 2023 and the reduction in the amounts from the previous fiscal year (in 2022 the percentage of refunds made in the same year of the request was substantially improved). For its part, the increase in annual returns was due to higher requests in fiscal year 2022, which are those that were mostly paid in 2023, and to the existence of extraordinary returns.