The system of personal income tax withholding in Spain:: a note on its recent reform
- Autores: Horacio Levy Copello, Magda Mercader Prats
- Localización: IX encuentro de economía pública, hacienda y medio ambiente: [Vigo]. 7 y 8 de febrero de 2002, 2002
- Idioma: inglés
- Enlaces
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Resumen
Diminishing the complexity of the Spanish Income Tax was one of the main objectives of its reform. However, instead of simplifying its structure, the strategy taken pursued to lessen the number of income tax filings. To accomplish it, withholdings on earned-incomes were reformed in order to make them as close as possible to the income tax li ability. In this paper we assess to what extent the reform has fulfilled its purposes of reducing the number of tax returns and of adjusting withholdings to the income tax liability.
Using the microsimulation tax-benefit model ESPASIM, results show that, after the reform, less than 25 percent of all taxpayers do not need to file a tax return. Another 20 percent are exempted from filing a return, but pay withholding in excess. Overall, the aggregate amount of withholdings is 20 percent greater than the income tax revenue. The analysis shows that the reform does not significantly reduce the compliance costs of taxpayers and increases them for companies. Finally, it also concludes that equity and generality are negatively affected by this reform.
