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Spanish tax burden |
| 8 / 9 / 2011 |
Spain has one of the highest tax burdens for high earners of any major economy, reveals research from UHY, the international accounting and consultancy network.
Spain has the 8th highest tax burden out of 19 countries according to how much tax and social security it takes from high earners’ wages. The table (below) ranks countries from highest tax burden first to the lowest tax burden last.
UHY International studied tax data in 19 countries across its international network, including members of the G8 as well as key emerging economies. Each country was asked to calculate the ‘take home pay’ for low and high income workers taking into account personal taxes and social security contributions. The calculations are based on a single, unmarried taxpayer with no children.
While Spain has the 8th highest tax burden for high earners out of 19 countries, it scored favourably compared to other EU countries. UK, France, Germany, Ireland, the Netherlands and Italy all take more in tax from high earners.
Spain has the 14th highest tax burden out of 19 countries for taxes on low earners. Ireland is the only other European country studied which taxes low earners less than Spain.
High earners were defined as workers earning USD$200,000 per annum while low earners were defined as workers earning USD$25,000 per annum.
TABLE 1: Spain vs. G8 Countries
Julian Sauca, partner of UHY Fay & Co in the office in Madrid, comments: “High earners in Spain take home just 64% of their pay compared to 87% in Russia. That is a huge difference that could have serious consequences for our economic competitiveness.”
“Companies look at personal tax rates when choosing where to locate. If the tax burden is too high, they may struggle to attract the necessary talent. While Spain compares favourably to other European countries, it is questionable whether taxpayers in Spain can shoulder a greater tax burden without damaging the competitiveness of the economy.”
“Achieving a more sustainable fiscal position will be difficult without raising taxes, but higher taxes are likely to hinder economic growth. Many high earners will be highly skilled and they are usually very mobile. Spain risks hemorrhaging capital and skills if high earners are taxed significantly more than competitor countries.”
TABLE 2: SPAIN and 19 UHY countries surveyed
For high earners the difference in the amount of tax collected between the highest taxing country – Italy - and the lowest taxing (excluding Dubai) – Russia - is USD$65,811, which means than a person earning USD$200,000 per annum in Italy would pay over three times as much tax and social security as the equivalent person in Russia.
The UHY research reveals that for low earners – excluding Dubai - the difference in the amount of tax collected between the highest taxing country – Germany - and the lowest taxing – Ireland - is US$5,788, which means than a person earning US$25,000 per annum in Germany would pay over six times as much in tax and social security as the equivalent person in Ireland.
Jordi Vilardell, partner of UHY Fay & Co in the office in Barcelona, comments: “Spain imposes one of the lightest tax burdens on low earners among the European countries studied. Reducing tax on low earners is a vital incentive to work and can have a significant impact on reducing unemployment.”
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