Ayuso wins again the game to the Executive of Sanchez and guarantees that the Madrid Treasury will directly manage the wealth tax. The measure will affect a total of 10,302 taxpayers in the region, expecting to collect 555 million euros per year that will be destined to undertake new tax reductions.
After the Constitutional Court (TC) endorsed the tax on large fortunes, and therefore the obligation of the Community of Madrid to charge those who had a wealth of more than three million euros, the president has given a setback and the tax remains in Madrid.
She counts on the votes of PP and PSOE, and the abstention of VOX, to move forward the bill that allows the regional government to assume the collection of the Temporary Solidarity Tax of Great Fortunes (ITSGF) during 2024. As it is well pointed out, this is a temporary measure, applicable only while the tax applied by the central government remains in force.
In short, taxpayers with a wealth of more than three million Euros will not have to pay more taxes, but the proceeds will go to the Community of Madrid, instead of to the State, as was the case up to now.
Thus, a Madrid citizen with a taxable income of 40 million euros in Wealth, with a taxable income in Personal Income Tax of five million euros, and who pays some 2.25 million euros in his Income Tax return, will have to pay 230,000 euros in the ITSGF. However, people who are not affected by the new tax will continue without paying Patrimonio.
Ayuso’s coup d’effect
From now on, Ayuso could use all this extraordinary income from the wealth tax in Madrid to apply an unprecedented generalized reduction of the Personal Income Tax. In addition, he could motivate a reform of the tax that would eliminate certain brackets.
In this way, a regional personal income tax deduction could be adopted for the highest incomes. It would only act on income from work, economic activities and savings, which would alleviate the extra payment of the large fortunes, although not 100% of them.
The Government of Ayuso does not rule out compensating this situation with other taxes, applying bonuses in Inheritance and Donations or the Transfer Tax (ITP) or Stamp Duty (AJD).
This is in addition to the IRPF deduction for foreign investors, with which the tax on large fortunes of the central Government is counteracted. The new taxpayers will be able to deduct 20% of the total capital destined to financial assets and to the acquisition of the habitual residence if they maintain them during the next six fiscal years. The cost of the average will be around 100 million Euros.
The highest incomes in the Community of Madrid will not be satisfied with the reinstatement of a wealth tax which, initially, was temporary. In spite of everything, the Treasury’s hunger for tax collection has been ended, at the cost of reducing talent and investment and exhausting the taxpayer.
A setback for the Government
All this occurs in a context in which the central Executive is preparing to maintain the temporary levies on banks, energy companies, large fortunes or the minimum rate of 15% of the Corporate Tax. This is a real setback for the central Executive, since 90% of the revenue from the collection of the levy is from the Community of Madrid.
The Government is obliged to comply with the Budget Plan set by the European Commission, although it assures that the tax cuts applied by several regions could cause an unprecedented impact on the public deficit. The loss of income for 2024 is estimated at 1,728 million Euros, tripling the loss of 613.3 million expected to close the current year.
In addition, the Ministry of Finance stresses that the bonuses and reductions of the taxes managed by the autonomous communities will subtract 2,050 million Euros from the revenue item in 2024.
The slowdown in the rate of collection of capital taxes must also be taken into account. Net corporate income fell between January and September 2023 by 11.1%, while VAT receipts fell by 1.6% in October compared to the same period in 2022. But the energy tax is expected to bring in a budget item of 2.4 billion euros.
New personal income tax deflation
Apart from the above, the Personal Income Tax (IRPF) will be deflated by applying a deflation of 3.1%, which corresponds to the average increase in the CPI during the first eight months of the year. It will be established in all the brackets, the personal and family minimum, the deductions in force and the income limit. 3.5 million inhabitants will be affected and a saving of 153 million Euros will be obtained for taxpayers, which added to the deflation of 2022, will amount to 350 million Euros in total.