Fedea maintains that the fiscal pressure has risen three points in Spain since 2019, while in the EU it has remained stable

Spanish fiscal pressure has been in crescendo since the outbreak of the pandemic. This indicator, which measures tax collection compared to the size of the economy, indicates that in Spain tax revenue was equivalent to 38.3% of GDP last year, 2.9 percentage points more than in 2019.

The case of Spain is striking because in the EU the fiscal pressure has remained practically constant in these three years. On average, EU countries recorded a volume of tax revenue of 41.2% of GDP – just two tenths more – than when the pandemic began. All in all, the tax pressure in Spain is still three points lower than in the EU.

This is reflected in a report published this Thursday by Fedea, a study center sponsored by some of the main listed companies in Spain or the Bank of Spain itself.. The document, signed by the doctor in economics Miguel Ángel García, points out that the main explanation for this increase in fiscal pressure is income taxes, whose collection has grown by 1.9 points of GDP since 2019.

The non-deflation of personal income tax rates largely explains the increase registered. By not adapting the tax brackets to the rise in prices, the salary increases that workers have registered have been diluted even though the salary improvements have not made them gain purchasing power in general.. Beyond deflation, booming jobs, recovering corporate profits and improving wages explain why income tax revenues have taken off. The emergence of tax bases from the underground economy may also have had an influence.

The second element that has contributed to boosting income is the higher VAT collection, which provides 0.5 points more tax pressure compared to 2019.. The recovery in consumption, also influenced by employment, boosted income from this tax despite the significant tax reductions in VAT on electricity and gas bills.

The third element that explains the increase in tax pressure is social contributions, whose weight on GDP also increases by half a point, especially with regard to those paid by the company.. In this last section it is the only one in which the Spanish economy registers greater fiscal pressure than in Europe (9.5% compared to 7.7%).

Match Europe to eradicate the deficit

Beyond the portrait of the situation, the Fedea document states that if Spain managed to raise the fiscal pressure to the level of the eurozone, it could reduce the fiscal imbalance it suffers.. “Given that the structural deficit of the Spanish public accounts is around 3.5% of GDP, a hypothetical equalization of the Spanish fiscal pressure to the weighted average of the Euro Zone countries would allow it to be solved,” they point out.

All in all, fiscal pressure is a concept with which we must be careful because it can lead to misunderstandings.. When you read that the tax burden increases, it may seem that the reason is that taxes have increased and this does not necessarily have to be the case.

A good example of this is what happened with the economy in 2020.. In the first year of the pandemic, the GDP sank and the tax pressure increased without any tax increase. This was possible because tax revenues fell less sharply than GDP, which is the denominator of the equation.

In 2021 and 2022 the opposite effect occurred. Tax revenues skyrocketed largely due to inflation and grew more strongly than GDP, which caused tax pressure to increase without greatly increasing tax rates.. In this section, it is important to highlight that the largest fiscal changes that the Government introduced in the previous legislature will unfold their effects in 2023 and 2024.. Two exercises for which we still do not have data.