Tax policies surrounding inheritance and wealth are once again at the center of political and economic discourse as the government introduces a new solidarity tax. A fresh levy applies to assets starting at 3 million euros in 2023 and targets autonomous communities that have abolished wealth tax. The government aims to curb a regional competition that has allowed Madrid and during a period Andalusia to use wealth tax exemptions, with Galicia also showing similar behavior under certain administrations, limiting revenue through these exemptions. The policy shift signals a broader effort to harmonize treatment across regions and to protect the national tax base while addressing regional fiscal strategies that have diverged from one another.
Wealth taxation remains a political battleground, according to Laura de Pablos, a professor at Complutense University, who notes in the volume The Pending Challenges of Decentralization in Spain that debates over wealth tax echo through elections and municipal discussions. The debate has panned from sweeping government reform proposals in the White Paper on Tax Reform to calls for eliminating the tax as reflected in documents like Libro Target. This ongoing conversation continues to unfold alongside analyses from the Institute of Financial Studies (IEF) and other bodies that gathered 60 experts for discussion about Spain’s tax reform trajectory.
tax demographics
As of 2020, wealth tax impacted 218,991 taxpayers, roughly 1% of all filers under income tax. The average net wealth subject to the tax stood at about 3.5 million euros, with exemptions including a main residence up to one million euros and a base level that begins at 700,000 euros plus an additional 300,000 euros exemption. The average tax payment hovered around 10,604 euros, and the regime generated roughly 1.2 billion euros in annual revenue. In Madrid, where a full deduction is allowed, the average tax liability tends to approach zero for many filers, while Catalonia reported an average tax payment of about 6,631 euros. Tax statistics published by the national Tax Agency show that about 67% of the tax base lies between 300,000 and 1.5 million euros (excluding the minimum one-million exemption). The remaining share, about 26%, comes from bases between 1.5 and 6 million euros, with corresponding average payments near 14,698 euros. Extremely high-net-worth filers, representing about 0.33% of the total with bases above 30 million euros, have an average pre-bonus wage around 668,508 euros.
Regional competition continues to shape the tax landscape as some autonomous communities reduce or abolish wealth tax while others tighten the regime. Areas such as Aragon, Catalonia, Extremadura, and Valencia have lowered or removed thresholds for wealth tax, while Madrid, Andalusia, and Galicia have pursued different exemptions or reduced the effective burden, creating a patchwork of regional policies that complicate nationwide benchmarking.
Arguments for and against
Critics point to issues of horizontal and vertical inequality, noting that wealth tax does not capture all forms of inheritance and that high net worth individuals can access various avoidance tools. They also raise concerns about double taxation and potential evasion that undermines revenue collection. Proponents counter that wealth represents a potential source of public revenue that supports redistribution and social spending. They argue that the tax can reduce disparities and fund essential services, noting that while revenue from wealth tax may be modest, it is not negligible and contributes to broader fiscal capacity.
In the government’s White Paper on Tax Reform, the prospect of relocating residence to lower-tax environments has been highlighted, with references to regimes for unusual residents in neighboring countries such as Portugal, as well as new resident frameworks in Italy and Greece. This context underscores the global dimension of wealth taxation and mobility concerns tied to policy design.
The strongest arguments in favor of wealth tax center on equality. Wealth can underwrite financial security, facilitate access to credit, and enable broader opportunities for prosperity. Advocates say wealth tax supports redistribution and public policy goals, aligning with social equity. Critics, however, contend that the tax generates limited revenue and may push assets to relocate or be transferred offshore, limiting its effectiveness and economic impact.
Two white papers almost simultaneously
After a prolonged debate about property taxes, a White Paper on Tax Reform released in early 2022 proposed a deep reform aimed at reducing the wealth tax burden, softening double taxation effects, and closing channels for avoidance and fraud. In January 2023, another White Paper on Spain’s tax reform brought together 60 experts under the Institute for Economic Research (IEE) affiliated with the CEOE. One key conclusion called for the elimination of wealth tax, arguing it diverges from common international practice and is viewed as economically harmful in many contexts. It suggested a tax shield that would cap the effective taxation of income and equity at no more than 50 percent of combined income and equity thresholds.
reform proposals
The reform outline supported by the White Paper envisions raising the minimum wealth exemption from 700,000 to 1,000,000 euros and adjusting the habitual residence exemption. It also contemplates a maximum rate of 1% rather than the current 3.5%, coupled with measures to reduce evasion and fraud. The White Paper emphasizes that true reform must address under-declaration, undervaluation of assets, and assets held abroad. Notable researchers from universities across Spain have highlighted a gap in reported wealth and actual taxes owed, with studies suggesting significant under-reporting among the wealthiest taxpayers. The White Paper argues that tax avoidance remains a key challenge, and reform should focus on reducing incentives for misreporting or shifting wealth into vehicles that escape taxation.