The President of Andalusia decided to reduce the wealth tax in his autonomous community to 100% and invited Catalan businessmen to relocate their residences to the Andalusian provinces to avoid the taxation imposed by the Generalitat. Andalusian President Juanma Moreno says she needs 7,200 new taxpayers He invited Catalan businessmen to take part in their autonomous communities, to compensate for the 93.34 million euros that Andalusia would have given up due to the disappearance of the Wealth Tax in practice. The question is whether downward tax competition between autonomous communities can encourage taxpayer relocation.
Does the tax reduction cause the transfer of taxpayers from one autonomous community to another?
“We believe that lower taxation of a region may be a reason for a change of residence for taxpayers, but it is impossible to know how many have changed residence for tax or other reasons,” he admits. Ruben Gimeno, director of the Tax Advisors Registry Studies Service of the General Council of Economists. this wealth taxmust be declared at the same company location as income tax (IRPF). Tax Administration; that is, in the autonomous community where you spend the most days of the tax period (usually the calendar year) on its territory or where you earn most of the income tax base (salary, savings or wealth increase). Therefore, it is not so easy to delegate tax residency and tax inspectors—both state and territory—and audit and sanction fictitious residence changes. The Catalan treasury made a total of 45 liquidations for fictitious change of residence in 2021, 15% more than the previous year, allowing 28.7 million in the largest number of wealth and inheritance taxes, up 97% from the previous year. and donations.
Can Andalusia compete with Madrid in attracting taxpayers from other regions?
This is so hard. Madrid not only reduced the wealth tax to 100% (as Andalusia announced it would). It also has the lowest income tax and inheritance tax in Spain. In addition to this financial appeal, being a capital has its advantages for Madrid as a pillar of attraction for investment, workers and professionals. For example, transport links connecting Madrid to Barcelona are difficult to match by any of the Andalusian provinces. a report from Public Policy Analysis Laboratory (IvieLAB, affiliated with Generalitat Valenciana) In the 10-year period between 2009 and 2018, when Madrid gained 103,035 taxpayers from other communities in 2020, it coincides with the period of the most intense tax cuts in the Madrid community.
Would lowering the tax result in more collections?
It is difficult to prove a positive answer to this question. Madrid’s tax collection has increased in recent years. tax returns. The Ministry of Finance opposes this, stating that revenue would have been higher had the taxes not been lowered. In total, the tax allows autonomous communities to collect 1,203 million (zero collection in Madrid).
How has the number of taxpayers among the autonomies developed in recent years?
The number of Wealth Tax applicants increased by 26% from 2012 to 2020 (with statistics published on this tax last year), reaching a total of 218,991 taxpayers (45,486 more than in 2012). During the same period, taxpayers in Madrid increased by 25%, a percentage similar to the state (although they each paid zero euros in tax). The increase in taxpayers in Catalonia does not differ much from the state average (23.62%). one of the highest wealth taxes in the country, at the opposite pole of Madrid. In fact, the decision to reduce the tax filing limit in Catalonia from 700,000 to 500,000 Euros is a case in support of the increase in the number of filers in this community. For the same reason, the number of applications in Aragon, where the tax return obligation has been reduced to 400,000 Euros, has increased 2.6 times since 2012. The average wage paid by each taxpayer in Catalonia was 6,627 euros in 2020. The total amount Generalitat paid for this tax was 546.5 million. In Andalusia, there are 18,997 taxpayers with an average net worth of 2.7 million euros, and they will stop paying an average of 4,913 euros a year each, with the bonus announced by the president.
Wealth tax?
In general, taxpayers with real estate related to economic activities, movable capital, insurance or luxury goods, taxpayers with a net amount of more than 700,000 Euros are obliged to declare Wealth Tax after their debts are reduced. The main residence is exempt up to 300.000 Euro. Inside Catalonia, Valencia and Extremadurathe declaration obligation arises from 500.000 Euro (increasing the number of files) and Aragon, from 400,000 Euros. “It is enough to have two or three different houses than normal to be taxpayer. I don’t think this is a rich person,” says Rubén Gimeno, director of the Tax Advisors Registry Labor Service at the General Council of Economists. This is one of the main arguments of tax opponents. 67% of the tax levied in the State as a whole belongs to the group of taxpayers whose tax base is between 300,000 Euros and 1.5 million Euros. 26.76 of the revenue comes from taxpayers whose tax base is between 6 and 30 million euros. Only 0.33% of taxpayers own this wealth.