3.2.1. Evolution of income for Personal Income Tax

Income from personal income tax amounted to 109,485 million euros and grew by 15.8% in 2022. The three factors that defined the growth in income were the increase in labour income (wages and pensions) and its effective rate, the good results of the annual declaration and the increase in the profits of personal companies. The income generated by these three elements (employment tax withholdings, the positive share of the annual declaration and the fractional payments from personal companies) explains practically all of the increase in income in 2022.

Income from withholdings from work and economic activities, which are the main component of the tax, grew by 12.6% in 2022. Growth has moderated since the highs of just over 13% in the first half of the year, mainly due to the evolution of withholdings in the private sector. In contrast, the public sector showed stability throughout the year, with an upturn at the end of the year when compensation for price increases was received. The reasons for the growth were job creation (very strong for most of the year, particularly in the first half), the increase in average wages and pensions and the rise in the effective withholding rate resulting from this increase.

In the private sector, the growth in withholdings was 12.9%. The trend, as has been said, was one of progressive moderation as the year progressed (the increase in the first half of the year had been 13.8%), in line with the evolution of employment. Average wages, unlike what had occurred in recent years, rose by more than 3% over the year as a whole (with increasing intensity over the months) and, as a result of this increase, the effective rate also rose. By type of taxpayer, in Large Companies revenues grew by 10.7%, about 7 points due to the increase in the average salary and the effective rate, with the remainder attributable to employment. In SMEs, revenue growth (17.3%) was higher than in Large Companies due to the high rates in the first part of the year, a period that was compared with quarters affected by restrictions on certain activities more typical of small companies. Growth in both companies was converging, although SMEs continued to grow more (13.6% in the third quarter) due to the greater dynamism of employment (the contribution of salary and type were similar in both types of company).

In contrast to the private sector, in public administrations the evolution was stable throughout the year except for two changes: the one in February for the payment to pensioners in compensation for the price deviation in 2021, and the one in recent months for the additional 1.5% increase in public salaries. Growth for the year is estimated at 11.7%. Withholdings from public pensions have grown by around 17% since March, around 10 points due to the increase in the effective rate (3 points due to the incorporation of new pensioners), five and a half points due to the increase in the average pension and just over one point due to the growth of the pensioner population. For their part, withholdings linked to public salaries grew by around 6% (until November the increase was just over 5%), mainly due to the rise in average wages and effective rate.

The second factor explaining the growth in tax collection was the income derived from the annual declaration. These revenues grew by 25.4%, 26.8% in the case of declarations corresponding to the 2021 fiscal year, which are the majority of those submitted in 2022. The main reasons behind this good result were the regulatory measures (increase in rates on the savings base and modification of the limits on contributions to pension plans, in addition to the end of other measures that had reduced the tax in 2020) and, above all, the intense growth of income not entirely subject to withholdings or payments on account (especially those from economic activities and capital gains). The other side of the annual declaration, the returns, barely changed (-1.6%) compared to the previous year and only contributed a few tenths to the increase in net income.

The third factor that significantly influenced the increase in personal income tax revenues in 2022 was the profits of personal companies, which boosted the growth of split payments to 21.7%. There are some reasons that qualify the above data, such as the fact that the high rates of the first part of the year were due, in part, to the comparison with quarters of 2021 with a pace of activity still weak due to restrictions; In this sense, the results in the last declaration filed (that of the third quarter) were lower than those of the first half of the year (they grew by 12.7%). In addition, in 2021 revenues were also affected by some regulatory measures aimed at softening the impact of low activity on the performance of these companies. However, even with all these caveats, the level of payments in 2022 was 28.5% higher than that recorded in 2019.

In the remaining components of the tax, three elements must be highlighted: the sustained growth of withholdings on capital gains, the recovery of withholdings linked to leases, and the decline, although maintaining very high levels, of capital gains derived from investment funds. Capital gains tax increased by 9.5% in 2022. Its evolution throughout the year was very irregular, but with results slightly higher than those of 2021. The improvement came from dividends, although the rise in interest rates was only marginally noticeable. For its part, withholdings from rental income grew by 11.3%, after two years of declines. The significant growth in 2022 means that the level of these revenues will be slightly higher than that of 2019. Finally, withholdings on profits in investment funds fell by 10.8%, but it should be remembered that they came from the historical maximum they reached last year, so that, even having lost income in 2022, their level for the year as a whole continues to be among the highest since the creation of this figure in 1999.