Regional Tax Cuts Across Spanish Communities Continue to Accelerate
Autonomous communities appear locked in a race to reduce taxes. As announced by the Valencian Community president, Ximo Puig, on Tuesday, Valencia has joined a growing list that includes Andalusia, Madrid, Galicia, the Basque Country, Murcia, and Castilla y León. The regions have outlined new internal Personal Income Tax (IRPF) measures that could affect more than 29.1 million residents in total, according to Europa Press.
These tax cuts, initially promoted by the PP and met with varying levels of criticism from socialist leaders, include a 10 percent increase in the tax-free allowance for Valencians, described as the maximum permitted by the rule. A new 2022 regional IRPF rate introduces a broad 10 percent boost in all deductions and reductions, with several sections adjusted for inflation. The Valencian government stresses that these changes target workers earning under 60,000 euros, about 1.34 million residents and roughly 97.4 percent of the eligible population. The measures will be reflected on the 2022 income tax return.
In Galicia, the regional government led by Alfonso Rueda indicated that the regional IRPF rate would fall from 9.4 percent to 9 percent, alongside a potential additional drop for taxpayers with annual income up to 35,000 euros. If enacted from January 1, 2022, estimates suggest the average Galician saver could gain about 450 euros, with a total fiscal impact around 46 million euros. Other targeted deductions for families with two children under 25 would see the first tranche drop from 9.4 percent to 9 percent as part of broader adjustments.
Several autonomies governed by PPCountries such as Galicia, Madrid, Andalusia, and Murcia have signaled intentions to further deflate the IRPF in varying degrees. In the Basque Country, where the PNV shares government with Euskadi’s PSOE, officials announced a plan to revert all IRPF rates to earlier levels. This, combined with a 1.5 percent cut implemented earlier in the year, would produce a 5.5 percent deflation for 2023.
Andalusia plans to cut the first three sections of the regional IRPF by 4.3 percent, a move expected to benefit about 82 percent of taxpayers, particularly within the first three brackets. The measure would take retroactive effect from January 1, 2022 and be visible in the following year’s tax return. The regional government argues that deflation is necessary to prevent wage growth from outpacing inflation, which would raise the tax burden and reduce the portion of income available for basic needs.
To shield basic living costs, the minimum personal and family allowances for which income tax is not charged are also rising in line with the same 4.3 percent inflation adjustment. Meanwhile, Madrid has announced a 4.1 percent reduction in the regional IRPF rates with the aim of easing the accounts for residents facing higher living costs. The plan includes a half-point deduction across all regional tax brackets set to take effect in 2023, with projected savings exceeding 300 million euros.
Murcia, under Fernando López Miras, approved by decree a 4.1 percent cut across the first four regional divisions of the IRPF. The government projects savings for about 330,000 residents, estimated between 8.5 and 10 million euros in total. The Murcia administration notes that about 96 percent of those required to file a tax return will be affected by the deflation.
Castilla y León has approved a bill to reduce the first tranche of the IRPF by 5.3 percent, effectively lowering the regional rate in the lowest division for 2022. The plan reduces the initial regional scale applied to the general tax base from 9.5 percent to 9 percent, resulting in a 5.3 percent overall cut in the primary tax segment.
Meanwhile, the government in Aragon acknowledged the possibility of further tax changes if the four-party coalition agrees. Javer Lambán reminded readers that the investment agreement among PSOE, PAR, CHA, and Podemos did not commit to moving fiscal policy in either direction. The discussion continues as regional budgets and inflation trends intersect with broader fiscal policy debates.