The Ministry of Finance entered nearly 255,500 million euros via taxes in 2022, 14.4% more than the figure registered in 2021 and an unprecedented record in the historical series. These numbers, as detailed this Thursday by the head of the branch, María Jesús Montero, have allowed Spain to advance on the path of reducing the public deficit, which ended last year at 4.8%, two tenths better than initially expected by the Executive in the General State Budgets. “Although the fiscal rules are suspended, the Government has not renounced the principles of stability and budgetary responsibility,” said the minister at a press conference in which she also criticized those who accuse the Government of “lining” with inflation.
“When we presented the 5% deficit target, many predicted that it would be impossible. However, for the third consecutive year, Spain meets the stability objective committed to Europe, ”he specified. The outbreak of the pandemic prompted a public spending policy that escalated the deficit to 10.1% in 2020 (compared to the 10.3% forecast), a figure that is also explained by the drop in collection due to restrictions on activity. In 2021, the deficit stood at 6.76% of GDP compared to the 8.4% forecast. In other words, “two years later we have reduced the rate in half. In just 24 months the fiscal balance has improved by almost 49,500 million”. This has also been achieved in a context in which the Government has deployed billion-dollar public policies to support and alleviate the population in health and price crises, stressed the minister.
On this path of deficit reduction, a lot has to do with the improvement in public revenue in 2022, some 32,000 million euros more than a year earlier thanks to “the behavior of the economy and the labor market.” The sharp rise in prices, Montero added, explains only a third of the rise in collections. “Inflation mainly affects VAT collection, having limited effects on Personal Income Tax and Corporations, which are the two figures that register the best performance,” he argued. Therefore, “it is false that the State is having a higher collection due to inflation. If income increases it is because employment improves”.
The ministry’s calculations on this matter contrast with those of other organizations such as the Bank of Spain, which ensure that close to half of the increase in income after the health crisis (46%) is explained by the rise in prices. Both the Treasury and the banking supervisor, however, agree that there is a not inconsiderable part of this increase that is difficult to explain.
For taxes, personal income tax closed 2022 at 109,485 million euros, 15.8% more per year. This is explained, according to the Treasury, because there are more jobs, better salaries and an increase in withholdings and income. Corporation tax, for its part, reached 32,176 million euros, 20.8% more annually. “The figure is due to the good behavior of corporate profits in 2021 and 2022,” explained the minister.
The third figure that grows the most, with an annual increase of almost 14%, is the value added tax (VAT), which closed at around 82,500 million euros. The CPI alone, argued the head of the Treasury, cannot explain the good behavior of this tax, since the improvement in consumption must also be added to the equation. In addition, she reminded her, the income from this tax would have been higher without the measures approved by the Government, such as the VAT reduction on electricity. Excise taxes recorded an improvement of 2.5%, up to 20,200 million.
At this point, Montero insisted that it is “false” that the government is having record revenues thanks to inflation. In addition, he defended that this unusually high collection is returning to citizens in the form of policies and public aid such as free transport, the old fuel discounts, the reduction of energy VAT or checks for vulnerable households. In total, all the anti-crisis measures approved by the Government, in force in the second half of 2022 and in 2023, represent the deployment of 35,000 million euros (not counting the 10,000 million guarantees for companies), with an impact of 22,217 million in 2022. “This figure represents double the income obtained by the State derived from the rise in prices,” said Montero. In other words, the “hypothetical over-collection” is returned “more than” to society in the form of more aid and protection from the effects of the war in Ukraine.
According to the figures provided by the ministry, the differential impact of the tax changes yields a tax reduction of 8,491 million euros (for example, discounts on energy VAT), while the tax increase measures reach 1,597 million. In total, some 6,800 million euros that have gone to the most vulnerable population, between homes and companies. To these are added more than 14,000 million in spending, articulated in measures such as the fuel bonus (5,752 million), aid to households (6,216 million), to economic sectors such as transport or the countryside (1,755 million) or the free transportation (571 million).
The minister defended the implementation of all these measures, without which the reduction in the deficit would have been greater. She also defended the general nature of several of them as a result of the reduction in VAT on basic foods that came into effect last January for the entire population. “There are measures of a general nature and others of an exclusive nature for low incomes,” said Montero. The objective of these policies is that there is no “fall in income” for the middle classes, “which are the ones that sustain the economy in terms of consumption.” Thus, she reiterated, it is not only necessary to attend to those who are most vulnerable, but also to help “the middle classes so that general impoverishment does not occur, as happened in the previous financial crisis.”
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