OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

English, French

The distribution of taxable income and fiscal benefits in Spain

New evidence from personal income tax returns (2002-2011)

The personal tax system has a large influence on incentives to work, save and invest and hence growth. At the same time it is a key policy lever for income redistribution. This paper analyses how income distribution patterns changed in Spain before and after the crisis using the personal income tax samples constructed by the Spanish Institute of Fiscal Studies for the period 2002 to 2011. We find that the top and bottom of the income distribution gained the most from the boom period, and the bottom suffered proportionally more in the subsequent bust. Although Spain's average personal tax rates were above the OECD average, personal tax revenue as a share was below the OECD average. One reason for this is substantial fiscal benefits that significantly reduce total tax received by the government. We examine the distribution of the tax burden, and especially how income deciles benefit from the different fiscal benefits, namely tax exemptions, reductions and tax credits. This reveals that Spain's personal income tax system is progressive, especially for labour income, but far less so for capital income. Some fiscal benefits, notably the tax credit on maternity, are highly progressive. Other fiscal benefits, mainly exemptions and reductions, are regressive. These include the exemptions on renting and on the interest from investing in dwellings and the reduction for contributions to personal pension plans.


Keywords: capital income, labour income, tax expenditures, Income taxes, tax rates
JEL: D31: Microeconomics / Distribution / Personal Income, Wealth, and Their Distributions; H23: Public Economics / Taxation, Subsidies, and Revenue / Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies; H24: Public Economics / Taxation, Subsidies, and Revenue / Personal Income and Other Nonbusiness Taxes and Subsidies
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