The richest of the rich who declare in Spain for the wealth tax reside in Madrid. According to the latest data published by the Tax Agency, corresponding to the year 2020, the average fortune of the people of Madrid who declared for this tax stood at 10.3 million euros, almost three times more than the average wealth of all taxpayers affected by this tax, which was around 3.5 million euros.
After Madrid, except for the Basque Country and Navarra –without data available because they have their own tax regimes–, Galicia would be placed, with an average wealth of 6 million, and the Balearic Islands, with 3.9 million. At the bottom would be Aragón (1.7 million average declared assets) and Extremadura, with just over 2 million. In Catalonia, the region with the highest proportion of declarants, the average wealth would be around 2.7 million, a figure very similar to the average wealth of Andalusia. In the Valencian Community, another of the autonomies with more weight, the heritage would be around 3 million.
The undisputed leadership of Madrid, according to the data, is explained in part by the design of the tax, since with different formulas the regions can keep or attract large fortunes to their jurisdictions.
The quintessential wealth tax affects taxpayers who own assets worth more than 700,000 euros, excluding the main residence up to 300,000 euros, although in some regions these figures change slightly. It definitively taxes the net worth of natural persons, that is, the set of goods and rights of economic content of which the taxpayer is the owner, with deduction of charges and encumbrances that reduce their value, as well as debts and obligations. personal for which it must be answered.
However, its management falls directly on the regional governments, which have the ability to discount it to a greater or lesser extent to reduce its final impact on taxpayers. That was announced precisely on Friday by the Xunta de Galicia, which will expand the regional bonus by 25 percentage points, up to 50%.
Madrid is the only one in Spain that reduces the tax to 100%, ending in practice with it. In other words, taxpayers in the region who meet the established requirements are required to declare their assets, but do not have to pay the corresponding fee.
The decision made in 2011 by the region now governed by Isabel Díaz Ayuso has been the subject of great controversy, both at the regional and state levels. The central government and several autonomies accuse the central region of promoting downward tax competition, attracting with this measure the large estates and encouraging changes of residence for tax reasons.
Data from the Tax Agency suggest that these movements to Madrid occur mainly among the wealthiest taxpayers. Since 2012, a year after the central region fully credited the tax, the average wealth of its filers has grown by 30% from 7.9 million euros. In Spain, the average increase has been 18%.
The percentage of taxpayers who pay the tax over the total number of filers also gives shape to this idea. Of all the taxpayers who have to declare in Spain, 87% pay the tax. However, the percentage of liquidators decreases as wealth increases, which shows that the great fortunes are concentrated where the tax is abolished.
In 2020, taxpayers with up to 1.5 million assets paid the tax 94% of the time, those with between 1.5 and 6 million did so 87% of the time, and those who move between 6 and 30 million liquidated it in half of the cases. The great fortunes with more than 30 million, however, paid it 35% of the time. This shows that 65% of the richest people resided in Madrid.
reforms
The wealth tax was abolished by the Government of José Luis Rodríguez Zapatero in 2008, when it was reduced to 100% throughout Spain. Three years later, and due to the ravages of the crisis that followed the outbreak of the real estate boom, it was recovered by the same Executive and extended by Mariano Rajoy and Pedro Sánchez. The current coalition government, after temporarily shelving the tax reform, is now working on a temporary and special tax on large fortunes and has committed to tax reform with Brussels by 2023.
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