07 feb 2017
CEOE’s Report on Taxes and Companies

Large companies pay an effective Corporate Income Tax close to 20%

The large Spanish companies pay an effective corporate income tax rate of 19.2%, in line with many of the countries of the European Union, as stated in a report by CEOE titled "Taxes and companies. An analysis of corporate taxes".

CEOE’s Report on Taxes and Companies
CEOE’s Report on Taxes and Companies. — ©CEOE

The report points that the 7% in taxes collected in different stages throughout the year does not reflect the truth as it can be seen when analysing the data from the Tax Agency. These include, for consolidated groups and for individual companies, two different percentages: on the one hand, the so-called “Effective rate on the taxable base" and on another the so-called "Effective rate on accounting profit> 0". The latter rate, which was 6.9% in 2014 for consolidated groups (typically large companies) and 13.9% for individual companies, is the one that has been used incorrectly to try to measure the corporate tax burden, stating that the big companies pay about 7% and the small ones 14%.

However, the criterion used is not correct. Firstly, that 6.9% is the result of comparing the positive accounting results with the tax rate, but Corporate Income Tax is not paid on the accounting result, but on the positive tax base. Therefore, it would be more correct to use the other percentage, that is, the one that reflects the relation between the tax rate and the taxable base. This percentage is the so-called "Effective rate on the taxable base".

If we compare these two amounts (taxable base and rate) using the Tax Agency's annual tax collection report for 2015, the business groups paid a 19.2% tax rate in 2014. Using the percentage on the taxable base when calculating the real tax rate is the right thing to do, since the taxable base is the true result for tax purposes. This taxable base is calculated by applying the off-balance sheet adjustments established by the actual Tax Act to the accounting result. In this sense, it is reasonable for the adjustments that reduce the accounting result to be higher in the consolidated groups than in the individual companies.

As for the large companies of the Ibex 35, the effective rate is around 21% of the global accounting result, considering the results obtained in all the countries in which they operate as well as the taxes on earnings paid abroad.

In addition, when analysing the corporate tax burden, social contributions paid by the company should also be included. In 2015, these amounted to €85 billion, a figure that is higher than the revenues collected from other taxes such as VAT or Personal Income Taxes.

 

>> Access to the report (spanish)