The tax burden in Spain rose two points in 2020, to 36.6% of GDP

Spain is the OECD country where the most tax pressure in 2020. Specifically, the weight of the collection of taxes and social contributions on the gross domestic product (GDP) increased by 1.9 percentage points, reaching 36.6% of GDP, compared to 34.7% of 2019 or 33% of the year 2000. The average tax burden in OECD countries rose one tenth, to 33.5% of GDP, according to the statistics published this Monday by the organization of developed countries.

The report finds that although nominal tax revenues declined in most OECD countries, declines in countries’ GDP were often larger, resulting in a small increase in the average tax-to-GDP ratio. In the Spanish case, the fall in state tax collection, for example, fell by 8.8%, and that of social contributions fell by around 3%. However, GDP fell much more: 10.8% in real terms and 9.8% in nominal terms. It was the biggest setback within the OECD countries. As a result of all this, the weight of income over GDP increased and, with it, the Spanish tax burden.

Government measures

Overall, the report notes that the impact of the COVID-19 pandemic on tax revenue was less pronounced than during previous crises, in part due to government support measures introduced to support households and businesses (such as the ertes, in the Spanish case). According to the OECD, government support measures “contributed to the relative stability of tax revenues by protecting employment and reducing corporate bankruptcies to a considerably greater extent than in the global financial crisis in 2008-2009”

For the next few years, the Government foresees a certain correction in the upward trend in the tax burden shown in 2020. All in all, Spain remains in the group of countries in the euro zone with the lowest tax burden, below Belgium (43, 1%), Austria (41.2%), Finland (41.9%), France (45.4%), Germany (38.3%), Greece (38.8%), Italy (42.9% ), Luxembourg (38.3%) Holland (39.7%) or Slovenia (36.9%) although above Portugal (34.8%), Ireland (20.2%), Estonia (34.5% ), Latvia (31.9%), Lithuania (31.2%) or Slovakia (34.8%).

Of the total tax burden in Spain, most corresponds to income from social contributions (35.5% of total income), followed by income from personal income tax (22.7%), VAT (18, 7%) and other indirect taxes (10.2%). Corporation tax barely represents 6% of total collection and those related to property and assets, 7.1%.

Between Mexico and Denmark

The report shows that the ratio of taxes to GDP of the countries in 2020 ranged between 17.9% in Mexico and 46.5% in Denmark, with increases observed in 20 countries and decreases in the other 16 for which it was available. data for 2020. The largest increases in the ratio of taxes to GDP in 2020 were recorded in Spain (1.9 percentage points), which experienced the largest drop in nominal GDP and the smallest drop in nominal tax revenue. Other large increases were observed in Mexico (1.6 points) and Iceland (1.3 points). The largest decreases were recorded in Ireland (1.7 points), partly due to lower VAT revenues following a temporary reduction in VAT and lower economic activity. Other important falls were observed in Chile (1.6 points) and Norway (1.3 points).

Corporations and special taxes

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Across the OECD, corporate income tax and excise revenue were the most negatively affected by the COVID-19 crisis. Corporate income tax revenues recorded the largest average decline (0.4 points of GDP, with declines in 26 countries); and lower fuel use due to mobility restrictions led to a small but widespread decline in excise duty revenue (0.1 point on average with declines in 28 countries).

In contrast, personal income taxes and social security contributions experienced an increase in income, on average (0.3 points in both cases, and in 28 and 29 countries respectively). The fact that the revenues from these two taxes were maintained probably reflects that governments provided considerable support to maintain the connection between workers and the labor market in this crisis. No changes were observed in property taxes or VAT as a percentage of GDP, on average.