The tax burden the State imposes on most salaried workers comes close to 60% of the gross salary those workers generate. Is that fair? And if it is, is what they receive in return fair? The average Spaniard works seven months a year for the State. Is it not time to be demanding of whoever takes more than half of your work?
Let us put the data on the table. Some 18.5 million people work in Spain, according to the Labour Force Survey published last January by the I.N.E. (Spain’s National Statistics Institute). The most common gross salary in Spain is €16,490.80 a year. So what we are discussing affects many millions of Spaniards.
Let us look at their reality. We are talking about the largest group of workers in Spain, a group that could be represented by Antonio (according to the I.N.E., the most common name in Spain, with 715,215 people; María Carmen comes second, with 668,639). So let us look at Antonio’s case.
Antonio is paid 12 gross monthly instalments a year of €1,374.23. To pay that gross salary, his employer needs to set aside €1,785.12. Why? Because, taking Antonio’s gross salary as the contribution base, there is a breakdown of contributions that can be summarised as the employer’s Social Security (S.S.) contribution, Antonio’s own S.S. contribution, and the withholding on account of personal income tax (I.R.P.F.) that the company must deduct and pay over to Hacienda (the Spanish tax authority) on Antonio’s behalf.
In short, the company bears a cost of €1,784.12 a month, of which only €1,237.68 reaches Antonio. The rest, €547.43 a month, goes to Hacienda.
– Gross salary: €1,374.23
– Employee SS: €87.26
– Employer SS: €410.89
– IRPF withheld: €49.28
– Contribution to Hacienda: €547.43
– Net pay for the worker: €1,237.68
– Cost to the employer: €1,785.12
So far, Antonio sees that, thanks to his gross salary, Hacienda collects every month the equivalent of 39.8% of his gross pay. Yet many people associate what they pay to Hacienda with IRPF, which for Antonio would be at a top marginal rate of 24%. As we can see, that is not the case.
Antonio’s month has just begun with the “joy” of his net pay landing. Antonio has the whole month ahead of him. So does Hacienda. The State’s treasury in its broadest sense (mainly central government, the regional governments and the town councils) is going to take Antonio by the hand, and together they will walk through the month and its expenses.
Housing
Antonio lives in Spain, in a home of 144.3 m2. That is what AFI (Analistas Financieros Internacionales) says, using data from the Land Registry (Catastro). According to the I.N.E. (National Statistics Institute), Antonio shares that home with 1.51 other people. The 2.51 people (the wonders of statistics) living in it have unavoidable expenses that involve an additional contribution to the State’s coffers.
IBI
IBI (Impuesto sobre Bienes Inmuebles, the municipal property tax) is calculated by applying a rate (between 0.4% and 1.3%) to the cadastral value. According to the Land Registry, the average total cadastral value of urban plots in Spain stands at €166,121.40, and that of real estate units (here the number rises and the average value falls, since it includes items such as storage rooms and parking spaces) at €59,424.62.
For the flat in question, let us use an average value of €78,151. Applying an average rate of 0.85%, we get an IBI of €664.28 a year or, in other words, €55.36 a month.
Electricity
According to a 2015 study by the National Markets and Competition Commission (CNMC), the average Spanish household spends €56.30. Of that bill, only 37.48% is actually the cost of energy. The rest is levies, mainly network charges, VAT and the electricity tax. In other words, 62.52% goes to the State in one form or another. In this case that is €35.19 a month which, shared among the theoretical members of a household, comes to €14.02 a month charged to Antonio.
Telephone
According to the CNMC, the average bill is around €36.09 a month. The VAT would come to €6.26 a month.
Food
According to the I.N.E., average spending per person living in a household is €177.23, on which the 10% VAT included would amount to €10.65 a month.
Alcoholic Drinks and Tobacco
Broadly speaking, 40% of the value of an alcoholic drink and 80% of the final price of tobacco are taxes collected by Hacienda. If the I.N.E. tells us that average spending per person living in a household is €10.89, taxes included, we are talking about another €4.08 a month for Antonio.
Fuel
According to AIS Group, the average Spaniard spends some €1,200 a year on fuel. That is €100 a month. At the end of December 2015, taxes on fuel stood at between 55.5% and 58%. Let us add another €57 a month to our long-suffering Antonio.
Fines
If Antonio lives in Madrid, he knows that five fines are issued every minute. In money terms, that means annual revenue for Madrid City Council of more than €277 million. Taking the number of vehicles into account, Antonio assumes that another €11.54 a month goes to the State in the form of fines.
In addition to the expenses highlighted above, according to the I.N.E., Antonio will incur a series of average household expenses, which I break down in the attached table.
As a result of all the above, Antonio has generated a total of €790.33 for Hacienda.
This amount represents 57.3% of Antonio’s gross salary.
When the year ends, if Antonio measures it against his gross salary, he will have worked almost seven months for Hacienda without earning a euro, and only from August would he begin to work for himself.
In this calculation, Antonio, after receiving his hard-earned salary and following the I.N.E.’s verdict, will have spent €799.83, of which some €240.42 will have gone to Hacienda.
Antonio is left with €197.44 to save. But Antonio should not get his hopes up: Hacienda is not going to leave him alone. Any return on the money Antonio saves will be taxed at a minimum of 19%. Hacienda will accompany Antonio throughout his life and beyond. See inheritance tax.
Antonio does not work for himself, nor for his family. Antonio works for Hacienda. We are not talking about great fortunes or millionaires. We are not talking about a handful of people. We are talking about the vast majority of workers in this country. The Antonios and the María Carmens. This is not populism; it is reality. And that being so, should they not demand that the State use their money efficiently and transparently, with audited accounts benchmarked against the best practices of other countries and sectors? Antonio ought to think about what is done with most of the money he generates, and ought to demand answers and accountability. Those are the numbers. That is how things stand…, for now.
Francisco Canós
Article published on 4 April 2017 in: 
