Skip to main content
Report 2020

3.2.1. Evolution of income for Personal Income Tax

Income from personal income tax grew by 1.2 percent in 2020. Taking into account the very unfavorable environment, the figure would remain positive even if the positive impact of regulatory and management changes is subtracted (without them, revenues would be approximately the same as in 2019). The main reason for this good performance of the tax was the effect that the high growth of public income (salaries and pensions) had on income, to which is added the comparison with the year 2019 in which most of the tax was carried out. of the refunds that resulted from the ruling that declared maternity benefits exempt.

Income from withholdings on income from work and economic activities grew by 1.5 percent. As has been said, the evolution was very different in the public sector and in the private sector, which was fully affected by the economic situation.

Withholding income in the private sector decreased by 0.8 percent. This figure includes the amounts from deferrals granted in the first months of the pandemic and that were recovered throughout the year. The drop is not large compared to that observed in activity, which is explained by two reasons. The first were the ERTEs that softened the impact on employment. Thanks to the ERTE, workers remained in the companies, although part of their salaries were paid by the Public Employment Service (SEPE). In terms of withholdings, this meant a reduction in income (the type of withholding applied to the part of the salary borne by the SEPE was practically zero), but less than what the disappearance of those jobs would have meant. The second reason has to do with the restructuring of employment that led to the economic recession caused by the pandemic, with a greater incidence in sectors, such as hospitality and restaurants, with low salary levels and retention rates. The consequence was that the effective withholding rate in the private sector increased. Precisely this different impact of the crisis on the different productive sectors helps explain the disparity between the slight increase in withholding income that was recorded in Large Companies (0.8 percent) and the 4.1 percent decline that was observed in SMEs (including the rest of the income that includes the deferrals granted and finally received).

In the AA. Administrations Withholding income increased 7 percent. The behavior was similar to what these incomes had been experiencing in 2019 (the growth then was 6.5 percent) and this can be said for both salaries and pensions. In the first case, there was a rebound in the last part of the year due to the increase in hiring in health and education, and due to the payment of the third tranche of salary regularization in the security forces. The final 2020 growth in salary withholdings was more than 7 percent, with an increase of more than 5 percent in the wage bill and the rest due to the increase in the average rate. In pensions, withholdings grew by close to 6.5 percent, a similar increase to that of 2019, although with a different distribution: The average pension rose less (in 2020 there were no increases that occurred in 2018 and 2019) and the effective rate much more (3.5 percent compared to 2019 in which it barely grew because the lowest pensions benefited from higher increases), compensating even for the lower growth in the number of pensioners (0.5 percent, 1.2 percent in 2019).

The annual declaration, not affected by COVID as it was the settlement of the 2019 financial year, also contributed to the growth of the tax. Specifically, the net results of the annual declaration increased by 1,366 million, although more than 1,100 were due to the higher extraordinary refunds for the maternity benefit made in 2019. In any case, the campaign was positive, with an increase in gross income of 5.1 percent even though the income that is normally behind this income (business and capital gains not subject to withholdings or installment payments) did not increase. substantially in 2019 (as you will remember, in 2018 they had reached a very high level, especially profits). In relation to campaign returns, the growth was 2.8 percent and a pace of realization was maintained similar to the campaigns of recent years.

In the rest of the tax revenues, only withholdings for profits in investment funds improved compared to the previous year. The year began with strong growth that was cut short in the first months of the state of alarm; After the summer, the previous trend was resumed until the year ended with increases of more than 50 percent. For the year as a whole, the increase in income was 11.6 percent. In other concepts the situation was the opposite. Withholdings for movable capital income decreased by 20 percent, with negative rates since March. The contraction in dividends began to be noticed early and particularly in the largest companies (something that was also transferred to the Non-Resident Income Tax). The falls observed in rental withholdings (-7.4 percent) and in installment payments (-10 percent) responded to the weakness of the activity, although in the latter case also to the reduction in income induced by the measures. approved in favor of small businesses.

Evolution of income for Corporation Tax

Corporate Tax revenue decreased by 33.2 percent in 2020. This drop in income does not give a good measure of the evolution of profits. A good part of it is due to the making of returns for the 2018 financial year. However, the impact of this displacement was cushioned by the existence of extraordinary income from sentences and by the comparison with the year 2019 in which there were returns also for this reason and for DTA payments to some companies. If all these elements are corrected, income would have fallen 10 points less, around 23 percent. This rate is in line with the behavior of installment payments, which are the most important component of the tax, the one most linked to the results of companies in the year and which in 2020 decreased by 27.1 percent.

The installment payments reflected the interruption of activity from the first moment (the drop in the first payment is due to the second half of March, the first days with strict confinement). The losses were more intense in Large Companies and groups, and within this group, in the consolidated groups, the most important of which were taxed in 2019 in the minimum payment modality. The information available on the results in Large Companies and groups indicates that profits fell in 2020 by 34.5 percent (-44 percent in the groups) and the tax base by 22.5 percent (-31.5 percent percent in the groups). Regarding SMEs, which mostly declare, not for the period profits, but for the last annual fee presented, their payments decreased by 7.6 percent. Although these payments, due to the way they are calculated, usually respond with a delay to the economic situation of companies, in 2020 the intensity of the fall in activity meant that the results were more negative than expected, particularly in the second payment due to the sharp decrease in SME payments that are calculated according to profit (around a third of the total). To this we must add the impact of the measures adopted for the benefit of SMEs, also concentrated especially in that second payment, and the reduction in the number of taxpayers.

In the rest of the tax revenues, growth was only recorded, as seen in personal income tax, in withholdings from gains in investment funds. In the other withholdings (movable capital and leases) the behavior was similar to that mentioned in the personal income tax, and in the annual declaration (corresponding to 2019) the income decreased slightly (-1.2 percent).