Next year, Catalonia will cease to be the autonomous community where taxpayers with the least income pay the highest personal income tax in all of Spain after the tax reduction finalized by the Government of Pere Aragonès. The proposal designed by the Department of Economy headed by Natàlia Mas is to lower the regional scale rate in the first tax bracket by one point: from the current 10.5% to 9.5%, according to sources consulted.
This modification that appears in the law accompanying the budgets prepared by the Government will affect almost three out of every four taxpayers. The beneficiaries will be all those citizens with an income of 33,000 euros or less per year. That is equivalent to 73% of the total taxpayers: about 2.6 million.
For the rest, the measure will have a neutral impact since the taxation in other brackets will be adjusted upwards slightly (a few tenths) so that those who earn more than 33,000 euros do not represent any impact and continue paying the same as until now.
Another of the measures proposed by the Mas department is to reduce the number of personal income tax tax brackets from the current new ones to eight. This change aims to make the limits between brackets greater and thus prevent a salary increase to compensate for the runaway inflation of recent months from causing some taxpayer to end up paying a higher rate than until now. An increase in income can sometimes lead to a step jump by receiving a higher salary to compensate for inflation.
Although the amount is not very large in absolute value, what is significant is that the Catalan taxpayers with the lowest income will no longer be – as until now – the ones who pay the most among the common regime communities, excluding the regional ones of Navarre and the Basque Country. . The highest taxation ranking in Personal Income Tax is headed – as can be seen in the attached graph – by Asturias, Valencia and the Balearic Islands. Then there is a group with the same type in which, in addition to Catalonia, there are Aragon, Cantabria, both Castiles and Murcia. In the rest, taxation will be lower than that of Catalonia.
With the changes promoted by the Generalitat, Catalonia will not be placed in the rest of the tax brackets as the community with a higher tax rate. It was an old demand by some groups such as employers.
The reduction will obviously have to be ratified in the law accompanying the 2024 budgets, so the Government will have to have sufficient support. For now the Generalitat has met with PSC, Comuns and the CUP without reaching any agreement. The PSC demands some gesture regarding compliance with some issues agreed upon in previous accounts such as the B-40 highway, the Hard Rock project or the El Prat airport.
What is certain is that the approval of the public accounts will not be before the beginning of the year. Even so, the sources consulted explain that the Generalitat wants the tax reduction to be in force retroactively from January 1.
Although taxpayers will not notice the reduction until next year when they file their income tax return. The withholding that companies practice on the payrolls of their employees on account of personal income tax is as if the state scale were applied throughout Spain on a regional scale.
Catalonia will no longer be the community with the greatest fiscal pressure in any of the sections
The reduction of the tax pressure on medium and low incomes by the Generalitat is part of the commitment that the Government acquired after agreeing on the investiture agreements of Pedro Sánchez with the PSOE. In an interview, Councilor Mas declared that based on the “investiture agreement and the profits obtained” some fiscal measures would be proposed “to alleviate, to the extent possible, the pressures on the cost of living of families.” . In that same interview, the councilor refused to enter into a race to lower taxes because public services could suffer.
Housing collection continues to fall
he cooling of the real estate sector is reducing the tax revenues of the Generalitat in the first 10 months of the year. Until October, collections from taxes on property transfers and on documented legal acts fell, in accumulated terms, by 13.3% and 21%, respectively. They are the two taxes that are most linked to real estate activity. In the latest report on budget execution of the Generalitat, the Department of Economy explains that “the drop in collection has been getting worse since the month of May” and adds that “real estate transactions are falling and the number of mortgages has been reduced to consequence of the increase in interest rates.” Between January and October the collection from the tax on property transfers was more than 1,500 million euros while that from documented legal acts exceeded 500 million. The non-financial income of the Generalitat until October 2023 was 29,695.1 million, 15.7% more. The liquidation of the financing model contributed 2,020.5 million while the previous year was zero. Advances from the financing model increased by 11%, which offset the aforementioned drop in income from taxes linked to the real estate sector and transfers