Taxes on inheritance and wealth are once again at the forefront of political and economic debates after the Government decided to promote inheritance. new “solidarity tax”. new tribute To be applied to assets starting from 3 million euro in 2023 and to autonomous communities where the wealth tax has been abolished. The aim of the government is to stop the autonomous race in this tax administered by Madrid and temporarily applied by Andalusia (the two communities that have completely canceled this tax) and Galicia (also administered by the PP). up to half.
“Wealth taxation is ubiquitous. political wars. application today more than ever election ups and downs”, of one kind or another, reflects professor at Complutense University Laura de Pablos in the volume entitled “The pending challenges of decentralization in Spain.” Institute of Financial Studies (IEF). Reflection strengthens again at the gates of 2023 regional and general elections mixed with the ideology that is budding (also municipal) and present in any discussion of fiscal policy. The latest thoughts on the wealth tax oscillate between the sweeping reform proposed by the Government’s ‘White Paper on Tax Reform’ commissioned by a group of 16 experts, and the elimination of the tax advocated by documents such as the ‘Libro Target’. Tax reform in Spain, with reflections from 60 experts convened by the CEOE’s Institute for Economic Research (IEE).
tax demographics
According to 2020 data, wealth tax falls on a total of 218,991 taxpayers (1% of filers income tax) average wealth 3.5 million euros (minimum of 700,000 euros plus 300,000 euros exemptions for main residences up to one million); and average wage A bonus of 10,604 euros and a total collection about 1.2 billion per year. However, in Madrid where a 100% tax deduction applies, the average wage per taxpayer is reduced to zero euros; For example, the average wage to be paid in Catalonia is 6,631 Euros. According to tax statistics published by the Tax Office,l 67% of taxpayers’ tax base is between 300,000 and 1.5 million Euros (excluding the one million minimum exemption). The average fee for these is 1,303 Euros. Another 26% of filers come from tax bases between 1.5 and 6 million (average fee for these is 14,698). Only 724 taxpayers (0.33% of the total) declare a tax base of over 30 million, a fact abounding in the arguments of those who stress that the greatest fortunes evade this tax. For each of these taxpayers, the average wage before bonuses is 668,508 euros.
Downward tax competition of some autonomies against others by lowering or canceling the wealth tax (as in this one). Madrid, Andalusia and Galicia) contrasts with the tax increase in others. Aragon, Catalonia, Community of Extremadura and Valencia where the tax begins to be paid from a lower wealth (400,000 or 500,000 euros) instead of the maximum general exemption minimum of 700.00 euros (in both cases excluding habitual residence up to 300,000 euros).
Arguments for and against
this land inequality It is just one of the arguments of those who criticize the wealth tax. horizontal inequality (not all inheritance types carry the same edition) and vertical (higher net worth provides more tax avoidance tools), as well as tax fraud and double taxation In the view of the critics, it generates this tax by deducting the tax bases they consider to be taxed on other figures. being a tribute distributed in the rest of Western countries, and exists only in Norway and Switzerlandarguments added by the defenders. loss of tax Heritage in Spain. They also add that they give up relatively. low collection (about 1,200 million) does not create a significant deficit in the public coffers, but rather can stimulate revenue through disappearance incentives. asset relocation towards other countries.
According to information contained in the ‘White Paper on Tax Reform’, commissioned by the government from a group of 16 experts, “with preferential tax regimes established in different states in recent years, the risk of relocation by transfer of residence abroad has increased, such as the ‘unusual residents’ regime in our environment. PortugalNew regime for ‘new residents’ or investors and retirees in Italy Greece”.
The strongest arguments in favor of wealth tax are Equality. In this respect, wealth is indirect source of income for those who own it, to the extent that it improves their financial security, facilitates access to debt, and increases their opportunities to enjoy greater prosperity. For advocates of the tax, this argument justifies its contribution to finance the taxation of wealth and redistribution public policies. And on his low collection, Professor De Pablos denies: “Low, yes; but not negligible.”
Two white papers almost simultaneously
After a long discussion that paused in the property tax and postponed the publication of the ‘White Paper on Tax Reform’ until March 2022, the document prepared by the Government concluded with the following recommendations: a deep reform It aimed to reduce the tax burden of the wealth tax, soften the possible effects of double taxation, and put an end to the channels of tax avoidance and fraud.
Recently, on 31 January, another ‘White Paper for tax reform in Spain’ was published, featuring the thoughts of 60 experts brought together by the Institute for Economic Research (IEE) affiliated with the CEOE. One of his conclusions was: “Necessary delete once and for all wealth tax, which is an exception in comparative law and is abolished in most countries due to its harmful effects on the economy. In the case of wealth tax protection, a tax shield must be established in which no more than 50% of income, as the sum of income and equity quotas, is ever taxed.
reform proposals
Deep reform, guided by the government-appointed White Paper, includes raising 700,000 to 700,000. one million euro minimum exemption your tax. It also proposes raising the current exemption minimum of 300,000 Euros. habitual residencewhile posing a fee with a maximum rate of 1% instead of the current 3.5%.
In addition, the White Paper received by the Government proposes to combat tax evasion, according to tax experts. Jose Maria Duran-Cabre Y Alejandro Esteller-More -they are mentioned- , First of all, it happens in two ways: underestimate (no declaration of unproductive assets such as jewelry or antiques or assets located abroad) or non-declaration. As an example, these professors from the University of Barcelona have calculated a 44.34% gap (equivalent to around 340 million euros) in wealth tax in Catalonia for 2014. they actually paid. According to this study, 73% of this deficit can be attributed to the richest 10% of filers. Professors estimate that this decimal taxpayer pays only half of their corresponding, and this is one of the arguments used by critics that the greatest wealth’s ability to flee causes tax to fall on median assets.
The ‘White Paper on Tax Reform’ also states that ‘tax reform abuse in the use of companiesOne of the main problems of the wealth tax is that it replaces the property of private companies, real persons, and above all, the property of inefficient or wealthy elements that are difficult to accept in relation to the execution of an economic activity. This requires deep tax reform. “It is clear that the probabilities of tax avoidance are not the same for all taxpayers, but are greater for the wealthiest individuals,” says the Public Finance professor. Juan José Rubio, in the White Paper for the financial reform of the IEE. “In practice, this phenomenon causes it to become more popular in countries where it is practiced. tax on small estates and middle classes instead of tax on high net worth“, Add.