On Thursday, April 25, the 2023 Annual Tax Collection Report was published.

The main collection data has already been known since the end of March, when the December Monthly Report was published, but in the Annual Tax Collection Report The evolution of income is analyzed in more detail and data is offered with a higher level of disaggregation.

In 2023, tax revenues amounted to 271,935 million euros, which represented an increase of 6.4% compared to the previous year. It must be remembered that in previous years growth exceeded 15% in 2021 and 14% in 2022, but both years were atypical, 2021 because it was the year after the confinement and 2022 due to the comparison with a period that had not yet existed. completely recovered to normality and due to the effect of the inflationary rebound.

As can be seen in Chart 1, income grew due to the increase in bases, although they were limited by tax reductions in personal income tax and VAT. Main tax bases went up by 7.6%. Income increased in particular (10.6%), with significant increases in all concepts, but especially in the profits of the companies. Expenditure, on the other hand, grew more moderately (3.6%) due, above all, to the fall in energy prices that reduced the value of consumption subject to special taxes and despite the fact that expenditure subject to VAT rose above 7%. This evolution occurred in a context of progressive slowdown in activity, although with high growth in nominal variables. An analysis of the behavior of the main fiscal short-term indicators was made in the February newsletter. In Graph 1, income and bases are accompanied by the nominal domestic demand of National Accounting, which is the accounting magnitude most related to the tax variables by including imports (among them, tourist spending). In 2023, domestic demand grew, in nominal terms, by 6%.

After three years of intense growth, tax revenues were almost 30% higher in 2023 than in 2019, the year before the crisis caused by Covid. And the same can be said of the bases.

When looking for explanations for this growth in bases and income, there has been speculation that the inflationary process that began in mid-2021 explains a good part of this expansion. However, as already noted at the time (see Annual Tax Collection Report for 2021 and 2022 ), prices were not the main reason for the increase. Firstly, because, despite the strong impact on certain products, overall prices between 2019 and 2023 grew half of what income and bases did. And, secondly, because the regulatory changes that had the most impact in these years were aimed at compensating for these price increases, so it is not appropriate to simply use the usual price indicators to measure their effect on collection. Among these measures, we should highlight the reduction in the VAT rate applicable to electricity, gas and basic foods, the total or partial elimination of taxes related to electrical consumption (Tax on the Value of Electrical Energy Production or the Special Tax on Electricity), the increase in the reduction for income from work that lowered the rate for the lowest incomes, and the modification of personal minimums, rates and deductions in the regional section of personal income tax.

As a consequence of the uneven evolution of income and spending and the negative impact of regulatory changes, the growth of revenue from direct taxes was higher than that of revenue from indirect taxes. The former grew by 10.1%, while income linked to spending (mainly VAT and Special Taxes) increased by only 1.7%.

Analyzing the three main figures in more detail (personal income tax, corporate tax and VAT), personal income tax income grew by 9.9%, with an increase in household income of 9%. The main causes of growth were the increase in employment, salary and pension increases, and the increase in the effective rate associated with these increases, which led to a considerable increase in withholdings for work income. Although its weight in the tax is less than that of previous withholdings, there was also significant growth in withholdings for personal capital income and in fractional payments from personal companies.

In the Corporate Tax collection grew by 9%, while the profits of the companies increased by more than 15%, which was reflected in a growth in installment payments, the main component of this income, of the same order. Also the positive quota of the annual declaration, corresponding to the settlement of the year 2022, experienced notable growth, greater than 12%. Despite these two elements, overall revenue grew by only 9% as a result of the high amount of returns in 2023, which is explained, in turn, by two reasons: the existence of a large volume of refund requests from the 2021 financial year (which were paid at the beginning of 2023) and the advance in the schedule for making refunds for the 2022 campaign (declarations submitted from the end of July 2023 ).

Finally, VAT revenue grew by 1.6%. Subject spending was 7.1%. The difference is understood if the impact of the different regulatory and management changes is considered (reduction in rates on energy and basic foods, but also the new regulation on postponements and the existence of extraordinary refunds). The net effect of these changes was an estimated loss of revenue of more than €3 billion.