The tax burden in Spain has increased across the board, both on companies and on citizens, in contrast to a very small increase in the tax burden in most advanced economies.
Specifically, the tax burden on average wages (including social security contributions and personal income tax) will rise to 40.2% of gross labour costs in 2023, six tenths more than the previous year, according to figures published yesterday by the Organisation for Economic Co-operation and Development (OECD). This makes Spain the fifth developed country that has increased its tax burden on workers’ salaries the most and widens its gap with the average.
The tax wedge, or tax burden on labour costs, rises to 40.2% for the average Spanish salary in the case of a single person without children, according to the figures contained in the report Taxing wages 2024, published yesterday by the OECD.
This tax wedge measures the difference between the gross labour cost that a company pays to hire a worker and the money that the worker ends up receiving net, after deducting the social contributions paid by the company, those paid by employees and personal income tax. This figure has increased by six tenths of a percentage point in the last year, due to the increase in social contributions and the non deflation of the IPPF, which is the fifth largest increase among developed countries, behind only Australia (which adds 2.2 points to its tax gap), Luxembourg (1.4 points), New Zealand (1) and Latvia (0.7).
This increase consolidates Spain as one of the countries with the highest tax burden on employment, 5.4 points above the average.
In 2000, Spain had a tax wedge of 38.6% of gross wages, 1.6 points below the current figures, while in the OECD it was 36.2%, a difference of 2.4 points that has more than doubled in recent decades. As a result, Spain has been climbing up the tax burden on employment ranking in recent years, moving from sixteenth position out of the 38 OECD countries in 2021 to fourteenth last year, after overtaking the Czech Republic and Greece.
