How many taxes are paid in Spain?

According to the Tax Agency (AEAT) in 2019, a total of 212,808 million euros were collected in taxes, which was 2% more than in 2018.

The AEAT reports, at least in Spain, come out a year late. So to get definitive data on a specific year, you have to wait until the following year. For example, to see the final tax collection for 2019 we had to wait until the end of April 2020. However, the distribution of the collection does not usually change much from one year to another. Therefore, in this article we will see how many taxes are paid in Spain and how they have evolved.

The foregoing not only provides us with tax information for use, but also offers us the ability to interpret whether the measures proposed by the different agents are possible. And more than if they are possible, which often are, what consequences would they have for their citizens.

Note: It is important to note that we refer to taxes because that is how most citizens refer to what are actually taxes. However, in the following link we explain the difference ↓

Not all state income comes from taxes

“Not everything that is collected is taxes, we must also take into account Social Security contributions, as well as other income.”

Not all that is collected are taxes, we must also take into account the Social Security contributions, as well as other income. These contributions are used to pay items as important as pensions (contributory and non-contributory) and unemployment benefits. However, when these contributions are paid, technically, the citizen is not paying taxes, but contributing. The idea is that the contributions of current workers serve to finance the beneficiaries of current pensions and unemployment benefits.

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The above is decisive. Why? Because most of the beneficiaries of pensions and unemployment benefits have generated, with their work, a right to collection. In other words, they worked, made contributions, and now it is their legal responsibility to receive these amounts. So the money from Social Security (public insurance) circulates between those who are generating the right and those who are exercising the right that they generated.

Thus, although there are beneficiaries who have not contributed legally (protected by the welfare state), these are a small part of the total expenditure. In conclusion, and taking into account that Social Security has a deficit of more than 20,000 million, it is not possible (or it should not) be dedicated to other items. In any case, it will be tax revenues (or debt) that should finance this deficit.

Distribution of tax revenues

Taking this difference into account, how many taxes does Spain collect? How have they evolved?

We can see this in the following two graphs:

Distribution Types Of Taxes Spain
Evolution of Total Tax Income in Spain
Source: AEAT

From these two graphs we can extract the following information:

  • 54% of tax revenues are direct taxes. Mainly from personal income tax and corporation tax (IS). It is equivalent to 114,053 million euros.
  • 45% of tax revenues are indirect taxes. Mainly VAT and special taxes (alcohol, tobacco, hydrocarbons, etc). It is equivalent to 96,590 million euros.
  • And, 1% of tax income is taxes and other income. They amount to 2,164 million euros.

If we add the items, they make a total of 212,808 million euros in 2019, as indicated by the second graph that represents the evolution of total tax collection.

And, taking into account that the population in Spain was about 47 million in 2019, each Spaniard paid on average in 2019, just over 4,500 euros. Without counting, yes, as we have indicated previously, the Social Security contributions.

How much could total tax revenue decrease in Spain?

It is difficult to make a reliable estimate, since tax collection depends on tax bases, tax rates and economic activity. Put more simply, it basically depends on whether taxes go up or down (political decision) and whether economic activity grows or decreases (economic, political and geographical environment).

For example, assuming everything else constant, if taxes hold (neither rise nor fall), but the economy shrinks, then tax revenue is expected to decline. Why? Because employment will probably be destroyed, which would produce a lower collection of direct taxes; and, possibly, citizens will consume less, which implies a lower collection of indirect taxes. In this case, without tax cuts, collection is reduced.

Due to the pandemic, many countries, not only Spain, will see their tax collection reduced, so public accounts will suffer large variations. Thus, although great efforts have been made to try to overcome the setback caused by this crisis, States must be cautious in their estimates of income and expenses. For a need for excessive borrowing could end up causing a collapse in financial markets.

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