taxes
Public administrations beyond local firms and municipalities spent 29,930 million euros in the first eight months of the year, edging up by 3.9 percent from the same period in 2022. The increase is tied to higher operating costs and a broader push to fund public services, programs, and investments demanded by today’s evolving needs.
Despite the higher outlays, the economy managed to grow, and the budget deficit relative to GDP narrowed by almost one tenth, reaching 2.05 percent of GDP according to the latest budget execution update. In the eight-month window, outlays rose by 25,441 million while revenues climbed to 24,314 million. Social benefits, routine purchases, employee salaries, and debt service all contributed to the spending surge, while tax collections supported the revenue side, reflecting a balanced push and pull between spending commitments and revenue performance.
As usual, the central government accounted for the lion’s share of the deficit at 32,845 million, up 36.2 percent and equivalent to 2.25 percent of GDP. This rise reflects mainly the final settlement of the regional financing framework in 2021, with pension-related spending also contributing to the higher central deficit, albeit to a lesser degree.
The regional accounts moved in the opposite direction, providing deficit relief and showing a 0.03 percentage point improvement in the overall balance compared with 2022, as adjustments took effect. In practical terms, the regional side maintained a modest improvement that helped cushion the total public sector deficit.
Only five autonomous communities ended August with deficits: Castilla-La Mancha, Catalonia, Madrid, Murcia, and Valencia. On the other side of the ledger, Social Security shifted into a surplus, reporting 2,419 million euros (0.17 percent of GDP) thanks to lower Covid-related outlays and stronger social contributions. The government deficit, meanwhile, showed a notable uptick in September as new accounting adjustments took hold.
The Treasury’s preliminary budget execution snapshot points to a state deficit of 26,022 million euros, or 1.78 percent of GDP, for the nine-month span through September, representing 39.8 percent of the annual deficit target. The accounting changes tied to the final adjustment of regional and local financing for 2021 created a negative effect for the state amounting to 11,798 million, offsetting some earlier gains and illustrating how structural policy shifts ripple through the balance sheet.
This factor influences both expenditures and revenues. Overall, spending eased by 0.6 percent to 193,796 million, while tax collections rose by 3.1 percent to 161,111 million during the same period, signaling a still solid revenue picture against ongoing fiscal pressures. The year-to-date view highlights how different layers of government—central, regional, and local—shape the public balance through a mix of transfers, investments, and policy-driven adjustments that affect both spending programs and revenue streams.
In the tax section, personal income tax collections declined by 3.5 percent due to the regional liquidation process, while value-added tax receipts slipped by 1.2 percent, reflecting discounts on food and energy. Corporate tax, by contrast, posted an 11.1 percent increase, driven by broader reliefs for several groups and a revised approach to calculating the tax base. The tax regime introduced 3,528 million euros in new items, including levies on banking and energy firms, a tax on large fortunes, and a 364 million euro charge on non-reusable plastic containers, signaling a deliberate shift toward broader revenue bases and sustainability considerations.
From January through August, government expenditures climbed to 219,818 million euros, marking a 2.9 percent rise. The growth was largely linked to regional and local agreements that increased transfers by 6.7 percent, while intermediate consumption rose 14.1 percent, partly due to election-related costs. Employee wages grew by 3.7 percent in line with salary adjustments, and debt interest improved by 3.4 percent as refinancing terms benefited the balance sheet. Taken together, these movements illustrate the ongoing balance between public services, policy priorities, and fiscal responsibility amid shifting economic conditions.
All figures are stated in euro terms and reflect the broader fiscal framework for the reported period. They underscore how policy decisions at central, regional, and local levels shape the path of the public balance and the wider economy, with revenue gains offset by higher spending across social programs, administration, and service delivery. The overall narrative remains one of measured budgeting: deficits at the national level persist, yet certain spending pressures ease in specific areas as tax intake remains resilient and regional financing reforms take hold.
Looking ahead, the public financial outlook points to a careful balancing act. The combined effect of central, regional, and local policies will continue to influence the trajectory of the deficit and debt service, while ongoing reforms aim to stabilize the fiscal position and sustain essential public services over the medium term. The evolving budget process will keep prioritizing core services, social protection, and prudent investments that support economic resilience in both Canada and the United States, reflecting shared fiscal realities across North America.
Notes on the figures: The data are the result of budget execution activities and reflect the reporting framework in use. Additional context and methodology come from official budget documentation, detailing how regional and local financing adjustments impact the state and the broader fiscal picture.