The IEE detects a new increase in fiscal pressure in Spain, which is around 39% of GDP

The Institute of Economic Studies (IEE), a think tank associated with the CEOE employers’ association, has prepared its particular report on tax competitiveness in Spain for 2023. The thesis defends that “the tightening of corporate taxation in Spain slows down economic growth.” The weight of tax revenue on companies and workers, in fact, would be increasing: according to the research service, the forecast of tax revenue will increase at a greater rate than GDP, leaving the fiscal pressure at 39% of GDP in 2023 .

Spain would be shortening its historical gap with the European average. The European Union reached 40.2% by 2022, while, in Spain, in 2022, according to Eurostat data, it has reached 37.7%, at a time of great economic uncertainty. “This increase in fiscal pressure has been carried out through the introduction of new taxes or the reform of existing oneswhich affect business taxation and savings and investment,” indicates its president, Íñigo Fernández de Mesa, who presented the document with the general director, Gregorio Izquierdo.

Regarding companies, this corporate tax pressure adds the corporate tax and the social contributions paid by the employee. The costs associated with the activity or contracting generate tax revenue to the Spanish State worth 12.2% of GDP, a figure that exceeds the 10.4% average for all European countries.

Specifically, the collection of Corporate Tax accounted for, in Spain, 2.7% of the GDP, and business contributions to Social Security accounted for 9.5% of the GDP, which combined represent 12.2% of the GDP. For its part, the EU average is 3.3% in Corporate Tax and 7.1% in Social Contributions paid by companies, which indicates that Spain is 1.8 points above the European average.

“If we analyze the percentage that companies contribute to the total collection, in Spain business contributions to Social Security represent 25.2% of the total collection, while in the EU the average is 17. 7%. For its part, Corporate Tax represents 7.2% of the total compared to 8.1% in the EU. In conclusion, our companies contribute 32.4% compared to 25.8% on average in the EU,” the report explains.

The cost of hiring

At a time when There is more talk than ever about the cost of dismissal and the ways open to modify it, the IEE has also put the cost of contracting and activity on the table. The expanded tax wedge measures this cost, which is the difference between what the company pays for the worker (labor cost) and what the worker receives net once salary costs have been deducted. “This indicator reflects the cost of hiring, one of the highest in Europe,” according to its president, Fernández de Mesa.

“The joint effect with Social Security contributions, which are particularly high in Spain, raises the tax wedge in Spain to 59.5% in 2022,” indicates the report, which emphasizes that this indicator is 47%. in developed OECD countries. Therefore, The worker would receive a net salary that constitutes 60% of the labor cost. Of the current 3,145 euros in labor costs, the salary cost remains at 2,359 euros and the liquid that reaches the worker is around 1,850 euros.

Badly placed in the global ranking

The research service uses the Tax Foundation’s Tax Competitiveness Index (ICF), which classifies countries based on their tax competitiveness and regulations regarding taxes. In 2023, Spain was among the OECD economies with the worst fiscal competitiveness, “with a strong decline in this indicator in the current legislature”, points out the IEE. In fact, the organization points out, the regulatory tax pressure (tax burden that the design of the tax system introduces into the economies) is 17% higher than the EU average.

The IEE highlights that last year, in terms of tax competitiveness, Spain ranked 31st out of a total of 38 countries analyzed, three positions higher than the previous year, but still eight positions lower than the 23rd position it occupied. in 2019 and one behind the 30th in 2021.

“This shows a notable loss of fiscal competitiveness in our country from the position before the pandemic, reflecting the effect of tax increases on companies and entrepreneurs, a trend that the Government seems determined to maintain in the current legislature, with continued tax increases. taxes and the maintenance of the new tax figures that were, in principle, designed on a temporary basis,” denounces the IEE.

The institute affirms that one of the two tax figures with a greater regulatory tax pressure in Spain is the Corporate Taxwhich is among the six most burdensome in the OECD, with a regulatory tax burden 28.9% higher than the EU average and 20.9% above the OECD average.

The other tax figure with the highest regulatory tax pressure in Spain is the estate taxation, “the second worst in the entire OECD”, only behind Italy. In this case, the IEE states that Spain’s position is 39.6% worse than that of the EU and 37.3% less competitive than the OECD average.

Regarding the Personal Income Tax (IRPF), the Institute points out that it is 6.1% above the EU average and is 2.2% higher than the OECD average. Furthermore, Spain is among the countries where personal income tax is most progressive; specifically, it ranks 10th out of a total of 28 analyzed.