Executive Summary

How many taxes do we pay throughout our lives?

Throughout his working life, a taxpayer who begins to work aged 16, who has a child throughout his life and who follows the salary evolution of an average Spaniard, pays as taxes an overwhelming amount of 456,571 euros, equivalent to a full salary of 18 years. Already retired, between 65 and 83 years, the accumulated tax burden will involve the payment of another 128,655 euros, which represent 9 full years of his pension.

If we consider the whole life of that average taxpayer, we conclude that, from 16 to 83 years of age, the overwhelming amount 585,226 euros will have been dedicated exclusively to the Treasury. This amount is equivalent to dedicating all the income received during 27 years of our lives. Therefore, if one enters the labour market with 16 years of age, his Tax Freedom Day would come when one turns 43 years old.

Spain: more taxes on labour than the OECD average

The «tax wedge» calculates the impact of personal income tax and social contributions on the payroll of workers. Contrary to what is usually stated, in Spain we have a tax burden on employment above the average of developed countries. Our average «tax wedge» is 35.9 percent compared to 39.56 percent of the OECD. There are 21 developed economies with lower labour taxes than Spain, including Luxembourg, Norway, Denmark, Holland, Japan, United States, Canada, United Kingdom, Australia, Ireland, Switzerland, Korea or Israel. Reducing the «tax wedge» would help create more employment, as it would reduce the cost of hiring and increase the net income of workers.

This is how taxes cut our salary

The sum of personal income tax and social security contributions reduces the net salary of workers significantly. For every 100 euros paid by the employer, any employee between 16 and 24 years old barely makes 68. For workers between 25 and 34 years old, the net remuneration remains at 64 euros for every 100 euros of labour cost. Among employed people between 35 and 44 years old, the “tax wedge” leaves 61 euros for every 100 euros spent by the company. From the age of 45, the worker barely receives 60 out of every 100 euros of labour cost.

We are not a country for children

By age groups, the “tax wedge” of a taxpayer without a family ranges between 32 percent and 40 percent. With the first child, this burden is barely reduced to an interval between 31 percent and 39 percent. For the second child, again we find an unattractive tax treatment: the “tax wedge” is still between 29 percent and 38 percent. There are hardly any tax reductions that favour birth; something of particular concern due to the demographic aging that Spain is experiencing.

Tax Freedom Day

If we consider the «tax wedge» made by VAT, Special Taxes and other levies, we find that the average Spanish worker dedicates 180 days of his salary to pay taxes. Therefore, the tax freedom day arrives on June 29, two days earlier than in 2015. By age groups, the date ranges between the 151 days of salary lost in income by the youngest and the 186 days of salary paid to the treasury for those employees over 55 years of age.

Not discounting inflation to the income tax costs 430 euros to each taxpayer

Failure to deflate personal income tax rates to consider inflation has resulted in a general increase in the tax effort that taxpayers assume. Since the crisis broke out, the Treasury has not reviewed the direct tax installments par excellence, resulting in a covert tax increase that costs 430 euros to each taxpayer. If inflation had been considered, the tax freedom day would have taken place on June 24.

Debt “makeup” covers 8,220 euros of future taxes

Public debt delays the payment of taxes to the future, but in any case it implies an increase in the tax effort that the workers assume sooner or later. The debt, which already reaches 100 percent of GDP hides the current weight of taxes in the amount of 8,220 euros. This heavy slab supposes a load equivalent to almost 60,000 euros for each working person.

Taxes in the Autonomous Communities

Catalonia is the Autonomous Community where the tax freedom day arrives the latest. In most regions, the number of salary days dedicated to fulfilling our tax obligations has fallen in one or two days, following the tax reduction approved at the national level in 2015. However, in the Basque Country and Navarra there has been a change for worse: the Basques have lost one more day of salary for taxes and Navarrese have experienced a two-day decline.

Navarra becomes the tax hell par excellence

As a result of the tax increases approved by the regional government in 2015, Navarra is becoming the tax hell par excellence. This community is the one that supports the highest tax burden in all of Spain, both for an average income of 55,000 euros per year and for a salary of 150,000 euros.