The maximum marginal rate of Personal Income Tax (IRPF) now exceeds 50% in three autonomous communities: Valencia (54%), Navarra (52%) and La Rioja (51.5%), which impose a tax on high incomes that exceeds half of the income. And four others have a tax rate of 50%: Asturias (50%), Cantabria (50%), Canary Islands (50.5%), Catalonia (50%), In contrast, the Community of Madrid has established the lowest regional tax bracket in Spain. Its taxpayers pay the lowest maximum rate, also 45%, nine points below the Valencian Community, according to the newspaper El Economista.
This is shown by data from the study Panorama de la Fiscalidad Autonómica y Foral 2022, prepared by the General Council of Economists (CGE). The report highlights that, in terms of personal income tax in the last year, Andalusia, Galicia, Madrid and the Region of Murcia lowered their rates, while the Basque Country and Navarre deflated them by 1.5% and 2%, respectively. Catalonia is lowering the lower rate brackets and slightly increasing the middle brackets.
According to the latest reports by the OECD and PwC’s Worldwide Tax Summaries, only nine countries in Europe exceed the 50% mark in the maximum marginal personal income tax rate. Denmark (55.9%), France (55.4%), Austria (55%) and Spain (54%) have the highest personal income tax rates among European OECD countries in 2021. Hungary (15%), Estonia (20%) and the Czech Republic (23%) have the lowest top personal income tax rates.
Moreover, in Spain the top rates are applied from a relative level of income that is much lower than in the surrounding area. Thus, while in the average of the European Union countries belonging to the OECD the maximum marginal rate applies from four times the average wage, in Spain it applies from only two and a half times the average wage.
This, together with social security contributions, raises the Spanish tax wedge above the OECD average. The tax wedge – the sum of social security contributions and personal income tax (IRPF) – in the OECD was 34.6% compared to 39.3% in Spain, placing Spain in the group of countries that pay the most. Some countries with lower taxes on labour than Spain are Denmark, with a tax wedge of 35.2%, and Norway (35.8%).
Furthermore, there is no country in the EU-27 that has a Wealth Tax like Spain’s. In Europe, it is only present in Norway and Switzerland with significantly lower rates than in Spain, and in recent years it has been abolished in Austria and Denmark (1995), Germany (1997), Finland (2006), Luxembourg (2006), Sweden (2007) and France (2018).