Income tax collection is close to 50,000 million so far this year and points to a new record
The Tax Agency has collected 49,931 million euros for personal income tax in the first six months of the year, 11.1% more than in the same period of the previous year, and a figure that sets a new record for the year as a whole.
This tax is the one that is contributing to the public coffers the most amount of income, due to the improvement of employment, since the more people are working, the more the State collects through personal income tax; and salary increases, which have been around 5% in the first half of the year. When a worker's salary rises, the effective rate of personal income tax increases, since the tax rate is structured in brackets and is progressive (the higher the salary, the higher the tax rate).
This increase in collections is influenced by the fact that the Government has refused to deflate personal income tax to prevent wage increases that have been equal to or less than inflation from being exposed to higher rates, since in practice this implies that the worker does not experience a gain in purchasing power but does have to pay more to the Treasury. Economists and experts, as well as the opposition, have asked the Executive to deflate the rate and the sections, even if it was in the first layers of income (up to around 40,000 euros), but it did not want to do so, so it has produced “an increase in the effective rate” that is applied to personal income tax. By paying taxes at a higher rate, on average, the amount collected grows.
About 2,100 million euros less per year could be entered if the personal income tax scale had been deflated
“Withholdings linked to wages continue to grow above 9%, with an increase in the wage bill of more than 7% (with wage increases around 5.5% and employment growth close to 2%) and a rise in the rate greater than 2% in cash”, explains the body attached to the Ministry of María Jesús Montero.
The Treasury Technicians union (Gestha) has calculated for EL MUNDO that the Tax Agency could enter 2,114 million euros less per year for personal income tax if it had deflated the tax scale according to the average inflation used to revalue pensions (from 8, 5%), based solely on the impact on employees -with salary data from 2021- and without taking into account the effect of the measure on pensioners; with what the reduction (and savings for taxpayers) would be in practice higher.
The Tax Agency has also collected more due to the increase in pensions, which have increased in value this year by 8.4%, which also implies more tax payments: “Withholdings linked to pensions increased by slightly more than 19%, with an increase in the mass of pensions of 11.4% (as a result of the increase in the average pension) and a rise in the rate of around 7%, a high figure taking into account the reduction in the tax on smaller pensions”.
For these reasons, the AEAT has collected 4,983 million more this year than in the first six months of 2022 for this tax, being the one that has contributed the most to public coffers, despite “having stopped entering 306 million euros for the increase in the reduction for income from work for low incomes”, less than 21,000 euros, as Luis del Amo, technical secretary of the Registry of Fiscal Advisors, reminds this medium.
For the whole of 2023, the Ministry of Finance had estimated that income tax collection would reach 113,123 million, 7.7% more than in 2022, but this rate of increase has been exceeded to date, since the increase year-on-year of the accumulated in the first six months of the year is 11.1%.
In 2022, income tax collection was 109,485 million euros and in total the State entered 255,463 million. For this year, the total collection will reach 262,781 million, 7.7% more, according to the Treasury forecasts. To date, tax revenues accumulate an increase of 3.8% year-on-year, half.
VAT loses steam
Although personal income tax is contributing more than expected to this increase in expected collection, VAT is not giving the stature as expected. Last year on these same dates, this tax accumulated an increase of 20.6% in collection, boosted by the good dynamism of consumption and, above all, by inflation, which by raising prices increased what the State collected for each sale.
However, in this first half of the year, the increase in VAT collection is limited to 0.1%, up to 42,458 million euros. The Treasury explains that this evolution is due, on the one hand, to the comparison with some months of the previous year in which the collection grew a lot driven by prices (last year average inflation was 8.4% year-on-year and this year, in So far this year, it stands at 3.8%) and, on the other, because the Government has approved VAT reductions on various foods, hence the effective rate of monthly declarations has decreased by 14%.
In fact, the Executive calculates that the reduction in the VAT rate on food will mean a reduction in collection and savings for consumers of 626 million euros for the year as a whole.
For all of 2023, the Government expected an increase in VAT collection of 5.9%, but given the evolution so far this year, this increase should occur entirely in the second half of the year.
In addition to VAT and personal income tax, the Tax Agency has collected 2,788 million euros for Corporate Tax in the first half of the year (10% more in homogeneous terms). The AEAT indicates that the collection linked to business profits has grown by 24.9% up to June, an increase that was observed above all in large companies, especially in the banking and energy sectors. 9,961 million were also entered for Special Taxes (practically the same as last year) and 5,905 million for the rest of the taxes.