Tax collection shows continued momentum through the first ten months of the year. Inflation acted as a catalyst. By October, the Tax Office reported total tax receipts of 223,695 million euros, up 32,285 million euros from the same period in 2021, a rise of 17%. Even with the impact of certain financial measures, the year began with an expected contraction in income from electricity, amounting to 6,009 million euros. Excluding that loss, overall collections would have been about 20% higher.
The primary driver, according to the Tax Office monthly collection report released this week, is stronger VAT intake. The inflationary period boosted VAT receipts, which rose 17.9 percent. At the same time, the consumer price index rose steeply, averaging 8.8 percent in the first ten months, suggesting heightened consumer spending as a contributing factor to higher VAT revenue.
A second factor behind robust revenue growth is higher withholdings from wages. These withholdings climbed 12.6 percent during the year, reflecting more jobs, higher salaries, and increased pension payments in the period.
A third factor concerns annual personal income tax statements and the performance of companies through 2021. Several firms reported tax collections rising more than 31 percent, underscoring strong corporate activity. Finally, tax receipts benefited from a notable rise in corporate tax installments, which increased by 18.7 percent.
On the downside, the downward impact of the electricity VAT reduction is visible. The 10 percent VAT was cut to 5 percent, resulting in a 1,211 million decline; the elimination of value tax on electricity generation contributed a further 3,093 million decrease, and the reduced excise duty on electricity accounted for about 1,705 million.
public deficit
The combination of higher tax intake and a sharp narrowing of the government deficit stands out. By October the deficit in national accounting terms fell to 18,016 million euros, about 1.37 percent of GDP, versus 59,468 million euros or 4.93 percent of GDP in the same period a year earlier.
Looking at the consolidated deficit for public administrations, excluding local companies such as the State, Social Security, and autonomous communities, it stood at 1.55 percent of GDP by the end of September after a year-on-year decline of 64.2 percent. Autonomous communities moved from a 0.69 percent surplus of GDP in the first ten months of 2021 to a deficit of 0.45 percent by October this year, amounting to 5,879 million. In Catalonia the deficit reached 0.70 percent (1,745 million), with a further 0.61 percent (1,397 million) of regional GDP attributed to other regions in 2021. Regions like Aragon, Asturias, the Balearic Islands, the Canary Islands, La Rioja, and the Basque Country were also affected. The Valencian Community stands out with a deficit of 2.081 million, equivalent to 1.70 percent of its GDP.