Taxation in times of COVID- 19
The Institute of Economic Studies (IEE) in its "Report on Fiscal Competitiveness 2020: Why can't taxes be raised further in Spain?" analyzes the counterproductive effects that a tax increase could cause in the current context and offers a ranking of the competitiveness of tax systems in OECD countries.
According to the IEE "there is nothing more inappropriate in the current situation than raising taxes". Some highlights from its report that support this conclusion are the following:
- Raising taxes cannot be justified by a low tax burden:
- The effective tax burden adjusted for the weight of the “informal economy” (which in Spain is higher than the EU average -22% vs 13%, according to the IMF-) is very similar to that of the European Union average (44.5% vs 45%, respectively).
- The "fiscal effort" (relation between the fiscal pressure and the GDP per capita of each country) is 6.6% higher than the European Union average.
- The gross corporate tax burden would also be significantly higher than the European Union average, reaching 11.1% of GDP in Spain in 2018 compared to 9.6% in the EU (distance that would increase if adjusted by the weight of the informal economy).
- Spain´s ranking 27th out of the total of 36th countries analyzed (worsening from position 23th it occupied in 2019) in the Fiscal Competitiveness Index.