Since the motion of censure that brought Pedro Sánchez to La Moncloa, “the tax policy followed by the coalition Executive has followed a clearly expansive path, with 97 tax increase measures that have raised taxes and contributions to record levels, especially on companies that are increasingly suffering greater tax pressure.” This is confirmed by the Juan de Mariana Institute in its latest “Taxometer”, in which it confirms – with data from the year 2024 – that the Treasury obtained a historic collection of 294,734 million, growing 8.4%, well above the GDP of that year, which remained at 3.5%, and with an increasing weight of companies and workers in their contributions.
Thus, the collection of Corporate Tax has skyrocketed by 57% under the coalition Government, with a “remarkable expansion” of income growth, from 24,838 million in 2018 to 39,096 million in 2024, 57% more. These figures have to do with the fact that Spain maintains one of the highest nominal rates in the EU, 25%, compared to a community average of 21%. “The increase in revenue is largely explained by the greater tax pressure on companies, not by an organic expansion of business activity, which in fact presented margins in 2024 similar to those achieved in 2019,” the report points out.
Revenue increases can be analyzed in two ways: on the one hand, they can be the result of an improvement in economic activity that brings with it greater collection and, on the other, they can be the reflection of legislative modifications that modify the tax bases, alter the payment rules or raise the applicable rates. As explained by the Institute, in the first case, “revenue increases as a result of growth, like a spill that increases public funds as a result of an expanding economy; in the second, it is the product of a fiscal policy that actively seeks to extract even more resources from economic agents than could be achieved simply by allowing production to increase”, so the 97 tax measures applied by the Government “confirm that the second option is the one taken.”
The analysis based on the Laffer Curve shows that the collection balance point for Companies reaches 21.6%, below the 25% that is generally adopted in Spain. «This means that a reduction of 3.4 points would allow us to maintain, and even improve, collection, by expanding the tax bases. In this way, a scenario with fewer taxes would end up bringing a similar or higher level of tax revenue, through an increase in private activity. Thus, with a 14% lower reference rate, “income would essentially remain at the same levels or even be higher.”
In the case of Spain, business taxation is in the high range of the EU. Among the few countries that have a higher corporate tax, three of them (Germany, Italy and the Netherlands) have announced that they will implement relevant reductions in the coming years, while in Spain the Government maintains its tax cruising speed, arguing that there is still room for an increase because it has not reached the maximum level in the EU. This has led us to the fact that, in terms of tax competitiveness, the ranking for OECD countries shows that the taxes applied to companies are in 29th place out of 38. «Spain applies a reference rate in Companies that comfortably exceeds the equilibrium thresholds suggested by the Laffer Curve – which illustrates the relationship between tax rates and total tax collection, and which shows that raising rates does not increase collection in the same proportion.
This evidence shows that around 50% of Corporation Tax is passed on to workers, in the form of lower income. “The effect that this tax has on salaries amounts to 942 euros per year of lower remuneration for each employed worker.” Therefore, the Juan de Mariana Institute demands that the Government “must lower taxes, because a reduction in Companies to around 2% would not even threaten public income, but would also help increase investment and productivity, improving Spain’s competitive position and increasing the incentives to do business in our country.”
The study highlights that part of the tax burden is also transferred to consumers “through higher prices” and to shareholders through a lower rate of dividend growth in the long term.