The tax burden will decrease to 35.8% of GDP in 2023

The tax burden was 35.8% of GDP in 2023, down from 36.0% the previous year, according to an estimate released Tuesday by the National Statistics Institute (INE).

According to INE, the tax burden increased by 8.8% in nominal terms, reaching 95 billion euros, corresponding to 35.8% of gross domestic product (GDP), remaining below the EU average of 40.0%.

An explanation for the decline in the tax burden as a percentage of GDP compared to 2022 is the fact that nominal growth in tax and collection revenues (8.8%) was lower than nominal GDP (9.6%), with INE indicating that ” because in 2019, in the pre-pandemic period, the change in GDP did not grow faster than taxes and fees.”

This dynamics of tax revenues, as noted by the national statistical authority, was due to a 2.3% increase in GDP and high inflation.

“The increase in tax revenues (+7.662 billion euros) mainly reflected the dynamics of income from effective social contributions, IRS, VAT and IRC, which increased by 2.893 billion euros, 1.592 billion euros, 1.159 thousand euros and 1.075 billion euros, respectively.” – says INE.

In 2023, there was an increase in all components of the tax burden, with the largest increase observed in effective contributions (11.7%). Direct tax revenues increased by 10.7%, reflecting primarily the dynamics of IRS revenues, which grew by 9.4%, and IRC revenues grew by 13.9%.

In terms of indirect taxes, growth was 5.5%, with VAT revenue increasing by 5.1% (still below the 18.4% increase in 2022).

Tax on petroleum and energy products (ISP), in turn, increased by 15.9%, which contrasts with the “sharp decline” recorded in the previous year (-21.3%).

In value terms, ISP revenues in 2023 brought in €445 million more than in 2022, when the behavior of this tax was influenced by measures taken by the previous government to mitigate the impact of rising fuel prices.

The increase in ISP revenue in 2023 was due to increased consumption of diesel fuel (4.5%) and gasoline (11.3%), and only last year “consumption (in volume) was recorded in 2019 (before the pandemic), in these fuel.”

However, as for IRS revenues, although they lost weight on all direct taxes (they weighed 65.8% in 2022 and 65.1% in 2023), they grew by 1.59 billion euros last year. primarily reflecting an 8.2% increase in withholding from dependent labor source income.

“This evolution is explained by an increase in workers’ compensation (10.5% variation in total remuneration in national accounts compared to 2022), reflecting an increase in employment levels associated with the recovery of economic activity and average wages per worker,” the national statistical office reports. body, also noting growth in business and professional income (4.7%) and pension income (3.1%).

The increase in IRC revenue was €1.075 billion, with INE saying the increase reflects increased economic activity in 2023.

INE also points out that the 11.7% increase in social contributions is due to an increase in employee remuneration (a 10.5% deviation in total remuneration in the national accounts compared to 2022), “reflecting an increase in employment levels associated with the recovery in economic growth.” activity” and average wages per employee with an emphasis on updating the minimum wage, which increased by 7.8%.