Of all the members of OECD, a club or mainly rich countries, fiscal pressure rose the most in Spain in 2020, reveals a new report by the OECD itself.
Fiscal pressure is defined as the tax-to-GDP ratio, and is a gauge of a nation’s tax revenue relative to the size of its economy. Fiscal pressure on the economy rises when taxes go up, or GDP goes down. Either way the tax burden on the economy rises, and must be paid for.
The tax-to-GDP ratio in Spain rose 1.9 percentage points in 2020, from 34.7% in 2019 to 36.6% in 2020, whilst the OECD average increased only slightly from 33.4% to 33.5%. This was the biggest increase of all the 38 members of the OECD.
The second highest increase in fiscal pressure in 2020 went to Mexico, with an increase of 1.6 percentage points. At the other end of the scale was Ireland, where fiscal pressure declined by 1.7 percentage points, and Chile (-1.6%).
The increase in Spain’s fiscal pressure was driven by a pandemic-related decline in GDP, rather than an increase in taxes last year. The Spanish economy took a bigger hit from the Covid-19 than the OECD average.
The OECD’s latest revenue statistics report on Spain also reveals that Spain has a higher than average tax-to-GDP ratio, but by no means the highest, which goes to Denmark (46.5%), followed by France (45.4%).
So, fiscal pressure in Spain would have to get a lot worse to reach the level of its European neighbour across the Pyrenees. You can see the ranking of tax-to-GDP ratios in the following graph.
Spanish property taxes
The OECD report also reveals that Spain collects a higher proportion of its tax revenues from social security contributions and property taxes than the OECD average. When it comes to property taxes, Spain has the 14th highest ratio out of 38 countries.
More than most other OECD countries, Spain likes to tax property for government income, and with Spain’s fiscal pressure rising the most in the OECD, the tax pressure on Spanish property is going to be under increasing pressure.