The tax system in Spain, with its regional peculiarities, often gives rise to significant differences in the taxation of wealth between autonomous communities. These disparities can be the subject of debate and concern. In this article, we will explore the views of economists from the Registro de Economistas Asesores Fiscales (REAF) on how to address this issue and achieve greater equality in the taxation of wealth across the country.
The problem of unequal taxation of wealth
According to REAF economists, the transfer of regulatory capacity in wealth tax to the autonomous communities has led to significant differences in the taxation of wealth between regions. These differences, they argue, should not be used to compete fiscally downwards, but to ensure that taxation does not penalize certain taxpayers for choosing to reside in one community rather than another.
REAF’s recommendations for addressing inequality
REAF economists make key recommendations to address this inequality in the taxation of wealth:
- Abolition of the wealth tax or limitation of autonomous community regulation: REAF suggests the abolition of the wealth tax or, at least, preventing autonomous community treasuries from regulating it. This measure would help to homogenize taxation in all territories.
- Homogenization of the taxable base and the minimum exemption: In the event of maintaining the wealth tax, REAF advocates the homogenization of the taxable base and the minimum exemption in all the autonomous communities. This would help to avoid significant differences in the taxation of wealth.
- Limitation of the regulatory capacity of the autonomous communities: In order to avoid excessive disparities, REAF proposes limiting the regulatory capacity of the autonomous communities to the rate, deductions and allowances, within certain limits.
Solidarity tax on large fortunes
In order to reduce inequalities, the Government temporarily established the solidarity tax on large fortunes as a complement to the wealth tax. This tax was applied to people with more than three million euros and cancelled the bonuses in some communities. It is still pending to be defined whether this tax will be maintained permanently or will disappear after 2024.
Inequality in inheritance and gift taxes
Inheritance and gift tax is another aspect that contributes to the disparity in the taxation of wealth. REAF points out that inheriting children under 21 years of age pay practically no inheritance tax in any community. Only if the heir is the spouse, descendant or ascendant (over 21 years of age) is relatively little paid in some communities.
In the case of gift tax for spouses, descendants and ascendants, communities such as Andalusia, the Canary Islands, Cantabria, Castilla y León, the Community of Madrid, the Region of Murcia, La Rioja and the Community of Valencia practically exempt taxpayers from paying.
Proposed reform to avoid inequality
In order to maintain equity and not penalize effort and savings, REAF advocates reforming these taxes. They propose establishing two tax rates: a relatively low one for close relatives and a higher one applicable to more distant relatives in general terms. In addition, they suggest establishing minimum and maximum margins within which the autonomous communities can exercise their regulatory capacity.
The unequal taxation of wealth in the autonomous communities is a complex but crucial issue in Spain’s tax landscape. The need to address these disparities and promote more equitable taxation is evident. REAF’s proposals put forward interesting options to achieve greater equality in the taxation of wealth across the country. The implementation of well thought out and equitable tax reforms can be fundamental in moving towards a fairer and more efficient tax system.