The Spanish Confederation of Business Organizations (CEOE) has recently prepared a report on the taxes of Spanish companies.
This report, entitled Business Taxation,
determined that the competitiveness of Spanish companies is not compatible with an increase in Corporation Tax. At least not until the tax burden is reduced in other taxes.
But how much tax do Spanish companies actually pay? In this article, we summarize the main tributes to clarify this question.
How much tax do Spanish companies pay?
When calculating taxation in spanish companies,this can be analyzed from the perspective of the accounting result or the tax base.
Keep in mind that the accounting result includes profits abroad, and computes the group of companies as a single company.
Therefore, it is best to analyze the tax burden from the perspective of the tax base. In this way, only the figure that the tax law understands as such is computed as a benefit.
The World Bank’s Paying Taxes
report calculates that Spanish companies pay 46.9% of their profits in taxes. If the
2017 Think Tank Civismo
study is chosen as the source, the figure rises to 61.5%.
However, for the above reasons, it is more useful to measure this impact on the tax base to analyse the tax burden.
In this sense, the CEOE estimates that Spanish companies pay around 22.5% of the tax base.
This amount represents 30.4% of the total tax collection, which represents a dizzying figure despite
the fall in it after the crisis.
But how are these taxes distributed in Spanish companies?
This tax has doubled between 2011 and 2016, rising from 3.8% to 7.3% on the tax base. It currently raises a sum of €24 billion.
After business contributions to Social Security, Corporation Tax represents the largest tax burden for Spanish companies. Thus, it reaches 10.6% of the total taxation.
Social Security Contributions
Counting only business contributions, the system collects a total of 93 billion in this way. In this way, business quotes represent 35.6% of profits.
This places this item as the main tax expense, since it ranges between 78 and 92% of the total taxation of the company.
Regional and local taxes
The figure for the collection of regional taxes reaches 2 billion euros. When referring to the
Tax on Economic Activities,
another 600 million euros will have to be added in the provincial capitals. For its part, the Tax on Constructions and Installations represents another 260 million euros in the capitals.
Regarding the remaining taxes and fees, it is difficult to calculate how much Spanish companies pay. They include the Real Estate Tax, the Property Transfer Tax and other minor taxes.
Special mention: VAT
VAT is not a tax necessarily linked to business activity,since its natural purpose is to be paid by the final recipient of the product or service.
However, companies face numerous non-deductible expenses. The tax burden derived from this tax will depend on the expertise of the accountant since, by definition, it should not be paid by the company.
In the Eurozone, the contribution of companies to the treasury is 26.2% on average. This puts Spanish companies at 4.2% above the average.
If the figures are estimated in taxes on profits, compared to an average of 40.9%, Spanish companies pay 46.9%.
On the other hand, a falsehood regarding the comparative tax burden of northern and Mediterranean Europe is unmasked.
Against these figures, the percentage of profits collected in the United Kingdom is only 30.7%, while in Denmark it remains at 24.2%.
Within the national territory itself, the amount on profits can vary from 49.67% in small companies to 61.57% in large companies.
These data have led to the CEOE has now positioned itself against the Government’s proposal to tighten taxation in Spanish companies.
The confederation perceives this strategy as a brake on the competitiveness of national companies,due to the strong fiscal pressure that they already bear.
It was precisely to support this allegation that the report used as a source was prepared, which was also based on the aforementioned Paying Taxes report by PwC and the World Bank.
The conclusion of the Business Taxationreport, therefore, is that
taxes on Spanish companies are already excessive,
and that an increase in them would lead to a rebound effect.
By worsening competitiveness, it would retract investment, which would lead to a reduction in taxation.