Catalonia will lower taxes to taxpayers with incomes of up to 35,000 euros per year, which represent 80% of the total. As announced this Thursday by ‘Minister’ of Economy, Jaume Giró, “almost all incomes will benefit from the reduction, but more those less than 12,000 euros, which will go from a type of personal income tax from 12% to another 10.5% “. Taxpayers will save between 52 and 104 euros in their annual income statement. The increase for some higher incomes will not exceed in any case a rise of 0.7% in their tax The Generalitat estimates the decrease in revenue for the treasury in the case of personal income tax at 19 million euros, which increases to about 23 million with other complementary measures of fiscal adjustment. The changes will have a special impact on low incomes, of up to 17,000 euros .
The Generalitat decides with this tax reform to establish a mechanism that allows to compensate the decision of the Constitutional Court that the reduction of personal income tax to the lowest incomes that the Government included last year. Giró and the Secretary of the Treasury, Marta Espasa, have worked on a tax reform that aims to “do justice to the group of the population with the lowest incomes,” according to Giró. Espasa reiterated that the chosen model aims to “neutralize” the effects of the direct reduction to taxpayers with incomes below 12,450 euros per year. But the reduction of the tax burden to the section also benefits the rest of taxpayers but in an amount that will vary in each case. According to Espasa, in no case will the measure involve an increase to be paid for personal income tax more than 0.7% of what it paid in the last statement. The reform presented has been presented to the parliamentary groups to be included in the next budgets and to be applied in the income declaration corresponding to 2022. In this year’s declaration, taxpayers will have to pay more after the decision of the Constitutional Court. .
The TC overthrew the previous reform
The Constitutional Court overthrew the previous reform presented by the Government for invasion of powers. In the current one, the Government is convinced of its legality since the autonomies can modify the rates and the sections. In the previous reform, an attempt was made to raise the exempt minimum to make the income statement and the Constitutional Court considered that measure unconstitutional. The measure lowered the tax rate for taxpayers with lower incomes by raising the exempt minimum from 5,500 to 6,015 euros. For the 200,000 taxpayers who benefited from the measure amended by the Constitution, the effects are not yet quantifiable and will depend on each case.
“The modification of sections has wanted to focus the effects on the lowest rents and try to affect the rest of the rents as little as possible,” explained Espasa. In practice, a first tranche of general taxable base is created up to 12,450 euros to which a tax rate of 10.5% is applied (12% above). To compensate for this reduction, more tax brackets are created and the second current tranche is divided into two, with a new tranche from 17,700 euros to 21,000, with the 14% rate, and another tranche of between 21,000 euros and 33,000 with a rate of the fifteen%. The section between 33,000 euros and 53,400 euros increases by 0.3 points. In this way, the benefit obtained by taxpayers with higher incomes is compensated with the reduction of the first tranche.
In the application of a case of a taxpayer with an income of 20,000 euros per year, single and without children, the reduction may be about 104 euros per year, in one of the examples most benefited by the reform given as an example.
The measure will be transferred to the parliamentary groups of Junts, ERC and the comuns to be introduced as an amendment to the accompanying law of the 2022 Budgets, together with two amendments to add deductions in personal income tax, another on the CO2 tax and another on inheritance and donations.