Monday, October 18

Budgets point to record collection with VAT and personal income tax at record highs

The Government has positioned as a key piece in the 2022 Budgets that the recovery boost tax revenues in order to cover the increase in social spending planned for next year. It has already been advanced that the expected increase will be 8.1% with respect to the expected settlement for this year but with the presentation of the accounts in the Congress of Deputies, it allows to go to the detail of the different items. Altogether, the budgeted tax revenue for 2022 will be 232,352 million euros, which represents a record of tax collection in Spain never before achieved.

Budgets reach this figure without practically making reforms in any tax or having approved new taxes. Only in Companies, where the inclusion of a 15% minimum rate has been approved, but its effects will not be immediate in next year’s budgets. Even with that, it is this tribute that is growing the most, according to the accounts for 2022. It will be 24,477 million euros, which is 11.8% more than in the previous year. The Government bases this estimate on the confidence that company profits will grow 12% next year, supported by the improvement in economic activity. However, despite the improvement, Sociedades is far from the 44,000 million euros it raised in 2007.

The taxes that will exceed their historical maximums are personal income tax and VAT. The income tax has been confirmed during the pandemic as the only one that has resisted above what was collected before the health crisis. That is why it registers the lowest expected growth among the large tax figures, despite the fact that a 6.7% increase in collection is contemplated. With this, the barrier of 100,000 million euros in income from personal income will be overcome for the first time in history. The Government justifies this growth by increasing household income.

With regard to VAT, this indirect tax will also mark its historic maximum in 2022, as contained in the Budgets presented this Wednesday by the Government in Congress. This consumption tax will collect next year, if the Executive’s estimates are met, more than 75,600 million euros, which represents an increase of over 9%. So far the maximum was set in 2019 with about 71,000 million euros. The increase in spending subject to this taxation is expected to increase by 9%, which will motivate progress in collection.

As for the rest of the fiscal figures, the set of special taxes will contribute 21,843 million euros, a figure slightly higher than that of 2019, which had been the highest collection in history for this concept. As with VAT, the components of this tax depend significantly on the evolution of consumption, which had weighed down their collection during the pandemic. It stands out for next year an 8% increase in the tax on alcoholic beverages and a 7.3% in which it affects beer. Hydrocarbons will grow by 7% and tobacco products by 5.5%. Only the special taxes on electricity and coal fall.

Environmental taxes will increase collection by 10.7%, to 1,440 million euros.

The Government had to make a new estimate of the collection planned for this year last spring, with a reduction compared to what was contemplated in the 2021 budgets. The delay in the recovery forced to send Brussels a new income data, less than initially expected. For next year, however, María Jesús Montero, Minister of Finance, has assured that it is a “conservative” forecast and that it is even possible that the final figure may be higher than expected.

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