TAX FREEDOM DAY IN SPAIN 2016 REPORT

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1 TAX FREEDOM DAY IN SPAIN 2016 REPORT

2 How many taxes does an average Spaniard pay during his life? We consider the case of a taxpayer who enters the jobs market at age 16 and slowly builds a professional career where his earnings are on par with the average evolution. This taxpayer will have one child, will retire at 65 years of age and will have a life expectancy of 83 years. According to our research, his cumulative tax burden once we consider social security contributions, income tax, value added tax and other minor taxation will amount to 456,571 euros between 16 and 65 years of age. This means that he will pay taxes for an amount that equals his total earnings for 18 years of work. Then, the taxpayer will retire and start living off his pension. During this period, his cumulative tax burden will rise to 128,655 euros, which means that the total earnings from 9 of the 18 years considered will go away in taxes. All in all, the total tax contribution of this average taxpayer will amount to a whooping sum of 585,226 euros, which equals to the entire of earnings of 27 years of his life. Hence, if he enters the jobs market at age 16, he will pay all his earnings in taxes until he is 43.

3 High unemployment with high taxes on labor The "tax wedge" estimates the impact of income tax and social contributions on the take home pay of workers. It is no surprise that a rigid labor market and a high tax wedge have resulted in high unemployment. Now that the labor laws are more flexible thanks to the 2012 reform, a key challenge is to reduce the tax wedge so that take home pay improves and hiring costs decline. According to our research, Spain still has a tax wedge of 39,56 per cent, as opposed to 35,9 per cent in the OECD countries. Civismo is leading the case for tax cuts and pushing for a lower tax wedge as a recipe for boosting employment. No country to have children By age groups, the "tax wedge" for a taxpayer with no family ranges from 32 to 40 per cent. With the first child, this range simply drops to an interval of per cent, while a second child means that the tax wedge moves between 29 and 38 per cent. Spain s population is getting older very fast, so lower taxes for families are needed in order to improve our demographic outlook. Tax Freedom Day If we consider the "tax wedge" (social security contributions and income tax) but also include VAT and other taxes, our research finds that the average Spanish taxpayer needs 180 days of his salary to pay all of his taxes. By groups of age, Tax Freedom Day ranges from June 1 to July 5.

4 Income Tax is higher by 430 euros because the IRS is not taking inflation into consideration By not following the Law and not deflating the Personal Income Tax brackets, the tax burden assumed by Spanishg taxpayers has increased. This results in a hidden tax hike that amounts to 430 euros for each tax payer. If Inflation had been properly considered when designing the tax brackets for each fiscal year, Tax Freedom Day would have taken place on June 24, five days earlier. Public Debt hides 8,220 euros of future taxes Public debt simply postpones the payment of taxes. If taken into consideration, Tax Freedom Day would fall on October 3 and taxpayers would have to pay an additional 8,220 euros. The current public debt ratio exceeds 100 per cent of GDP, which translates into more than 60,000 euros per worker. About Civismo The mission of Civismo is to evaluate social and economic public policies, raise awareness among citizens, and get alternative options out into the public debate. In 2015, Civismo reached 70 different media outlets, with more than 800 impacts that summed up a total audience of more than 250 million people. The report on Tax Freedom Day for 2016 has been developed by Javier Santacruz, who works as a researcher for Civismo and holds a PhD in economics from Essex University. For more information, log in to civismo.org! If you wish to contact us, send an to

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