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December 16, 2016

The tax burden in Spain

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The tax burden in Spain

Those funds that Spain collects in the form of taxes and social contributions of its citizens are quite far from the numbers of some European states. In fact, the country occupies a very discrete position among the European Union when it comes to this issue.

According to Eurostat, the EU statistical office, the tax burden in Spain, which consists of direct and indirect taxes and social security contributions to the country's economy, last year reached 34.6% of GDP, which is one tenth more compared to 2014.

If we also compare these data with other European Union countries, we can see that Spain is situated at the bottom of the table: 17 of the 28 countries belonging to the European Union registered a higher rate.

On average in the European Union the tax pressure during the last year was around 40% of the national GDP, while in the euro area it reached 41.4%. France, Denmark and Belgium are the main countries, where the tax burden exceeds 47% of GDP, while in Austria, Sweden and Finland it is slightly below 45%, and in Italy it is equal to 43.5%. These are the seven countries with the highest tax burden in Europe and those that also exceed the euro area average.

In Germany, this index is below the average, i.e. 40% of national GDP, although it is still in line with the statistical data presented for the EU. Along with this figure are countries such as Greece, Hungary, Luxembourg, the Netherlands, Croatia and Portugal, with a tax burden of more than 35%, while in the United Kingdom, Malta or Spain this percentage is reduced even more. The Czech Republic, Estonia, Poland, Cyprus and Slovakia are situated even more behind Spain, despite the tax burden of more than 30% of national GDP.

Below this level we find countries like Latvia, Lithuania, Bulgaria, Romania and the Republic of Ireland, the only country where this percentage is less than 25%. However, in the case of Ireland, the Eurostat agency makes an important clarification: the calculation of its GDP has been influenced by the transfer to the country of the activities of large transnational corporations outside the European Union.

But which tax items are the most profitable for the European states? In the case of Spain, and according to Eurostat data, the highest proportion of tax revenue comes from social contributions, more precisely 12.3% of national GDP. However, this Spanish figure is below the EU average (13.2%) and the euro area (15.3%).

On the other hand, the same difference is observed in the other main tax items. For example, incomes from personal income tax (IRPF in Spanish) amounted to 10.1% of Spain's GDP, which is almost three percentage points lower than the EU and the euro area averages, while in the case of VAT revenues the difference was a bit higher: 6.5% in Spain, which is a few tenths less than the average data for the countries of European continent.

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