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The observatory of business margins

The Observatory of Business Margins has recently been published. This is a joint project promoted by the Ministry of Economic Affairs and Digital Transformation, the Bank of Spain and the State Tax Administration Agency.

The information on this Observatory can be consulted on the portal created by the Bank of Spain ( ) as on the Tax Agency's own website ( Tax Agency: Observatory of business margins ).

The objective of the Observatory is twofold. On the one hand, it is about clarifying the concepts related to business margins. For this, two methodological sheets have been prepared with the definitions and the main sources of information. On the other hand, the Observatory aims to facilitate access for analysts, researchers and any interested citizen to the information already available on these margins and to the possible extensions that may be developed in the future.

Indeed, there is a certain confusion when talking about business margins, confusing these with the final profit of the companies. The information provided in the Observatory is used for the analysis of the gross operating result, which in terms of National Accounting is called Gross Operating Surplus. This surplus measures the balance generated in the company's production activities, once the labor factor has been remunerated. Seen another way, they are the resources available to the company after the production process that will allow it, among other things, to pay its owners, satisfy any debts it may have, pay taxes or, where appropriate, finance its investments. . In normal business analysis, this surplus is the best approximation to the concept of EBITDA (earnings before interest, taxes, depreciation and amortization).

The second objective of the Observatory is to make information on margins more accessible. Some of this information is not new, since it was available in different places. For example, the profit and loss accounts of companies (and their balance sheets) can be consulted in the Corporate Tax statistics since 2002 ( Tax Agency: Unconsolidated annual corporate tax accounts ), and sales, purchases and salary data from the Sales, Employment and Salaries in Large Corporate Companies and SMEs report ( Tax Agency: Sales, Employment and Salaries in Large Companies and SMEs ) already allowed a quarterly approximation to the evolution of margins. With less coverage, the Central Balance Sheet Office of the Bank of Spain also traditionally carries out analysis of the gross operating result. What does the Observatory contribute then? Firstly, it groups and centralizes relevant information on the subject; secondly, it has made it possible to systematize the information and offer more detail about it; and, thirdly, it provides a framework from which to face future extensions, some of which are already planned and others will emerge as users raise new needs.

From the Agency's point of view, the publication of the Observatory has served to visualize, once again, the wealth of information available. Although the Corporate Tax statistics are consolidated statistics in the analysis of corporate profits, the Observatory has made it possible to publish more details by activity and advance the publication of the results for the 2021 financial year by a few months (the first data for the financial year will be published in August 2022 whose declaration most companies will present in the coming days). Furthermore, the combination that is made in the Observatory of the information from the Corporate Tax and that obtained from the monthly and quarterly declarations of VAT and labor withholdings, allows see the coherence between the sources and the usefulness of having quarterly indicators for monitoring sales, purchases, wage bill and margins. The graphs shown below, referring to the food industry (one of the 74 activities published), are a good example of this aspect.

Sales in the food industry - variation rates (%)

Purchases in the food industry - variation rates (%)

Personnel expenses and wage bill in the food industry - variation rates (%)