3.2.1. Evolution of income for Personal Income Tax

Income from personal income tax grew by 7.5 percent in 2021. It must be remembered that this tax also grew in 2020 (1.2 percent) thanks, above all, to public salaries, pensions, income support policies (unemployment benefits, ERTE transfers, aid to self-employed) and fiscal measures to support SMEs. It is due to this growth in 2020, to which this year's is added, that the income figure in 2021 is 8.8% higher than that of 2019 and it is the growth of this tax that explains most of the increase in the total collection compared to that year.

Growth in 2021 was based on four elements: the increase in labor withholdings (particularly for SMEs), the decrease in refunds (including the Allowance to the Catholic Church, whose 2019 settlement was brought forward to December 2020), the growth of installment payments by companies personal and the exceptional increase in withholdings on capital gains in investment funds.

In 2021, income from withholdings on income from work and economic activities grew by 6.1% (7.7% compared to 2019). The increase was even in the private and public sectors (7% and 6.8% respectively), although it must be taken into account that in the Public Administrations last year was also one of growth and that part of the withholdings of the private sector In 2020, they were counted in the rest of the income as they were affected by the deferrals caused by the fiscal measures to alleviate the situation of lack of activity of the companies (if these amounts are added in 2020, the increase in the private sector would be reduced by one point and half).

Within the private sector, the greatest growth was observed in SMEs whose withholding income grew by 14.7% compared to 3.6% for Large Companies. The latter did not fall in 2020 due to the existence of some extraordinary income and that meant that in 2021 the rate was not very high. In any case, compared to 2019, SMEs also recovered their position more intensely than Large Companies (+5.4% in the former, +4.4% in the latter). In this comparison with 2019, we must introduce the factor of the sectoral change that has occurred in the last two years, reducing the importance of activities with salaries and effective rates smaller than the average. This factor has led to a growth in the withholding rate and, consequently, withholdings exceeding the level of two years ago, despite the fact that the private sector wage bill has not yet reached the 2019 figures.

In the income from withholdings of the Public Administrations, those from salaries grew by 6.6% and those from pensions by 7.2%; in the first case below 2020 and, in the second, the opposite. In salaries, the year began with a high growth rate, similar to what had been observed after the summer of 2020 as a result of hiring in health and education. This impact (and a similar one derived from the regularization of the security forces' salaries) faded as the months went by and, except for an occasional increase, the trend was one of moderation. Unlike 2020, in which growth occurred despite the fall in employment in Local Corporations and in the Central Administration, in 2021 the final result of the year was due, above all, precisely to the increase in employment, which also It caused wage increases and the effective rate to moderate. In pensions, on the other hand, the pattern was one of relative stability throughout the year, with increases of around 7.1% since March, distributed evenly between the increase in the pension mass and the rate.

The second element that allowed the increase in income was the decrease in returns made. As will be discussed in the next section, returns linked to the annual declaration decreased by 4.6%. Added to this is the fact that the way in which the annual settlement of the Appropriation to the Catholic Church was carried out was also outside the normal pattern. This settlement is usually made in January for the outstanding balances of the declaration from two years earlier. However, the payment for 2019, which should have been paid in January 2021, was brought forward to December 2020. The consequence was that in 2021 the amounts for this concept were lower than those in 2020 and, therefore, its negative impact on income was also lower.

In line with what has been commented elsewhere in this report, the high growth in SMEs was also reflected in a notable increase in installment payments from personal companies: 17.4% compared to 2020 and 5.7% above 2019. Payments were affected by several regulatory measures in 2020 and 2021 (see Impact Table), although the one with the greatest impact (the increase in the general reduction approved at the end of 2020) had an effect on the annual declaration (in fact, the decrease of income in this was practically the same amount as the estimated impact of said measure).

The last element to highlight in 2021 was the exceptional growth in withholdings derived from capital gains in investment funds. In 2020 they had not had bad results (they were the only withholdings on capital income that did not fall, they even rose by close to 12%), but in 2021 their increase was extraordinary: 86.2%. Never before has a level like that of 2021 (1,052 million) been reached. Until we know the details of the operations carried out (only the aggregate data declared by each entity is available) it is not possible to know what the reasons were for this peculiar behavior. In the other withholdings on capital, the situation was not so favorable. In withholdings on movable capital income, a growth of 7.4% was recorded, insufficient to compensate for the sharp drop in 2020 (-20%), so that income remains more than 14% below those obtained in 2019. . And something similar can be said about withholdings for leases; In 2021 they were practically at the level of 2020 and, therefore, their income remains far from that of 2019 (-7.6%).

Evolution of income for Corporation Tax

Income from Corporate Tax increased by 67.9% in 2021. This is one of the cases in which the 2021 rate may not give a correct idea of what the year was like, when compared to 2020 in which the drop was very large and not all of it for economic reasons (remember that, Of the 33.2% decrease, around 10 points were explained by the management of returns). Therefore, it is better to make comparisons with 2019. In this case, it is concluded that the 2021 collection was 12.2% higher than that year. It must also be taken into account that in 2021 there were a couple of corporate operations that contributed around 2,000 million in additional income not linked to the normal evolution of profits. In any case, even without taking into account these outliers, collection would continue to be higher than that of two years before (+3.8%).

Most of the tax growth in 2021 is explained by the evolution of installment payments. Payments increased by 53.4% in 2021 (-26.9% in 2020). The final payment figure is 12.1% higher than in 2019 (+3.1% if the aforementioned atypicalities are taken into account). The profile for the year is 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 accounted for most of the interruption in activity. Hence the strong growth in the first and second payments in 2021 and the more moderate growth in the third. The growth of the tax base, which is what is behind the behavior of payments, was somewhat lower in Large Companies and groups, 36.9%. The difference with the increase in payments is due to the greater weight within the income of the minimum payment (which is calculated on the accounting result and not on the base) as a consequence of the strong increase in benefits (73.9%, 54, 9% if the two mentioned operations are subtracted).

By type of taxpayer, the largest increases were observed in the groups (even without extraordinary ones) that almost doubled their 2020 income, although they were also the ones that registered the greatest drop then. Compared to 2019 and adjusted, payments would be 3.4% higher than those of that year. Their profits more than doubled (110.1%), although without the extraordinary operations they would have grown by 74.4% and would be on par with those of 2019. In Large Companies, payments grew by 22.3% (+4.7% more than in 2019), approximately the same as their tax base and about 10 points less than profits, which were also somewhat higher than in 2019. In SMEs the growth was 9.2%. It must be remembered that part of these payments are not linked to benefits, but are calculated with the previous year's quota, in this case 2020 and, therefore, they barely grew (in this group they increased in the first payment, but decreased from the second when they began to be calculated with the 2020 declaration presented in July). In the rest of the SMEs, those that pay according to the profit of the period, payments increased close to 40%.

Another part of the tax growth was a consequence of the lower refunds made, as will be shown in the refunds section. This positive effect of the decrease in returns was slightly offset by the gross income of the annual declaration which, being for fiscal year 2020, showed a decrease of 6.7%.