Coalition partners plan a new increase in personal income tax on capital income, the third since 2021, which would keep the maximum rate – which taxes income above 300,000 euros – at 30%, seven points above the rate in effect just three years ago. Since then, the tax authorities have continued to make money. The tax brought in 2.606 million euros in 2020. The figure exceeded 3.884 million last year; 49.03% more. Now the PSOE and Sumar anticipate a further increase in pressure, taking advantage of the favorable wind of the markets, especially in the area of variable income, where part of the remuneration imposed by the tax comes from.
The government -at the time- led by Sánchez and Iglesias began to intensify the tax pressure on savings in the 2021 budgets. The accounts provided for an increase of three points for capital income over 200,000 euros, from 23% to 26%. A year later, under the presidency of Yolanda Díaz, a further increase of one point in the rate is planned – to 27% – and a new tranche is created – from 300,000 euros – imposed at 28%. If the tax reform succeeds, the maximum rate will increase by another point.
However, what was agreed upon during the draft is far from the initial aspirations of Díaz’s team. Sumar demanded a much larger tax increase from the first vice president, María Jesús Montero. The training is put on the table for the negotiation of the 2025 Budget project – which continues to develop in La Moncloa – bringing the maximum rate on capital income to 33%. With this, they predict that another 400 million could be added each year, which would bring the annual income to 4.284 million euros in 2025. Sumar sources insist that 60% of the income of senior executives of multinationals comes from capital income, this is why they consider it “fair” and “equitable” to move towards a fair personal income tax system which taxes labor income, the rate of which maximum is 47% for brackets above 300,000 euros.
Finally, the path agreed between the coalition partners commits to leaving fiscal pressure on savings in the middle, although further escalation in the coming years is not ruled out. At least that is the intention of Sumar, who has made it his main budgetary flag. In fact, the tax agreement signed by the partners affirms the intention to “continue to advance horizontal equity in labor income.”
Díaz has already tried to “introduce” an increase in the maximum rate in the 2024 budgets which failed. His team insisted that the remuneration of executives of large companies is up to “174 times” higher than that received by their workers.
Today – while tax reform has not yet been designed – the argument is gaining ground again. “85% of income tax collection comes from employee income, and not from capital income,” underline training sources. The latest available data supports this figure. However, the increase in job creation in 2023 has a lot to do with it. Last year ended with 783,000 new workers and employment surpassing 21.2 million people.
Nevertheless, the majority of experts who have been calling for a structural reform of taxation for some time advise continuing to bring the personal income tax on capital income closer to that which taxes labor income. “In Spain, capital income is taxed at lower rates than labor, which reduces the progressivity of the tax system,” explains Gestha. The president of the Union of Treasury Technicians gives an example: “one who has one million in capital income pays the same price as a person who has a fixed salary of 42,000 euros”. Carlos Cruzado spoke a few weeks ago during a conference in Congress, during which he defended that the text should bring “more progressivity to capital income, through new rate increases.” In fact, the OECD already demanded in 2014 a move towards duality between the two taxes.
However, and despite the agreement, the PSOE and Sumar will treat their tax agreement – which includes the increase in personal income tax on savings – through a catalog of amendments, which are not sufficiently numerous to succeed in the Congress of Deputies. Coalition partners took advantage of a text currently being drafted to speed up deadlines and force approval of a “secret” tax reform before the end of the year. However, the selected bill – dedicated to the establishment of a global minimum tax of 15% for multinationals – presents several limits. The main one is that it must be in force from 2025. Otherwise, Spain risks receiving sanctions from the community executive, since the final objective of the initiative is to transpose a European directive.
The mess that the socialist group caused with the registration of the reform through a tangle of amendments threatens to precipitate the fall of a text subject to community commitments. From the PNV, its spokesperson, Aitor Esteban, does not exclude that Moncloa ends up withdrawing the amendments and treating the reform as a separate law.
