Malaga closes 2024 with record state tax revenues for third consecutive year

Malaga will end the current financial year with record takings in the main taxes collected for the Spanish state. This is nothing new as the province has been hitting new highs for three years in a row. What is new is that the record high that reached over 4.68 billion euros in 2023 has already been beaten this year in ten months. According to the latest figures available up to October end, the provincial tax office (AEAT Malaga) had already collected tax revenues of over 4.92 billion euros. This means that, with the figures for November and December still to be collected, the people of Malaga have paid taxes in excess of the total amount paid last year by 5%.

This is something that does not happen across the board in Spain as the tax revenues registered for all Andalucía - almost 18.7 billion euros up to October - are still 1.25% below the slightly more than 18.9 billion euros collected in the whole of last year. Similarly for Spain as a whole, the just over 254.87 billion euros are 6.3% below the almost 272 billion euros collected in the whole of the 2023 financial year.

So, Malaga is somewhat of an exception for being better at collecting taxes for the Treasury than much of the country and the region. That said, it is not the only one: there are a dozen other provincial tax offices that are also already collecting more than in the whole of 2023 and several are from Andalucía (Cadiz, Seville and Jaen), and those from other regions are Alava, Guipuzcoa, Teruel, Ciudad Real, Valencia, Palencia and Cartagena.

However, Malaga still stands out for another reason. It is true that the province's record highs have been achieved in parallel with the economic progress made by the whole country: AEAT was setting successive tax revenue records at state level also in 2021, 2022 and 2023 as a result of factors such as the dazzling economic recovery after the pandemic, the favourable progress in the labour market, the rise in wages and pensions and the contribution also made by the intense inflation recorded in recent years due to the problems of supply of some goods and the impact of Russia's invasion of Ukraine. Despite all this good news, in Spain as a whole not all the main tax figures are at record levels, but they are in Malaga province.

Of all the state taxes breaking records perhaps the one to focus on most should be corporation tax (the tax levied on business profits). For all Spain the corporation tax total for 2023 slightly exceeded 35 billion euros, which means that it was still 20% short of the nearly 45 billion euros that were collected in 2007, the current maximum recorded. By the end of October this year the total collected stands at 34.63 billion euros.

So, what has happened in Malaga? Despite the province's revenues from corporation tax only reaching 580 million euros last year, meaning that the figure was still 34% below the maximum achieved in 2007 (883.3 million euros), in this financial year 2024 the collection of this particular tax has experienced a qualitative and quantitative leap. By the end of October it had already surpassed both the amount collected in 2023 and the maximum recorded in 2007, standing at over 915 million euros.

In the opinion of César García Novoa, Professor of Financial and Tax Law at the University of Santiago de Compostela, although in Spain as a whole the recovery in corporation tax revenues (from 15.9 billion in 2020, the year of the pandemic, to more than 35 billion last year) is due to the elimination of tax benefits and also to aggressive tax inspections, in Malaga province they have been more thorough in those inspections and checks.

As to the opinion of Jorge Onrubia, Professor of Public Finance at Madrid's Complutense University, the fact that corporation tax collection figures are at record levels has to do either with the growth of economic activity or with the change in the economic structure. He has identified that it is the latter that has affected Malaga positively: the fall in the construction sector compared to the figures it had in 2007 - the last year of the real estate boom on which the collection of this tax was largely based - has been compensated by the growth of activities in the service sector, and not strictly, he says, those linked to tourism. This is what has allowed this province to distance itself, for the better, from what is happening in Spain as a whole. Onrubia points out another factor: the rise in revenue has been achieved to a large extent from new companies not dragging a previously negative financial track record behind them like those that came from the loss-making years of the 2008 economic crisis or the pandemic.

Natalia Sánchez, general secretary of the CEM confederation of employers of Malaga, emphasises that the revenue figures are due to the entrepreneurial nature of the province in current times: "We are no longer talking about one out of every three companies in Andalucía being born here, but four out of every ten. And Malaga is also at the forefront in terms of self-employment. This is reflected in employment, with a record number of new sign-ons and a drop in unemployment, and also in tax revenue. The pending issue is investment, but we would need the context to make this possible." In turn, Fernando Cubillo, provincial secretary of the CCOO trade union, added that "2024 has been a very favourable economic year and that this has been reflected in the business surpluses (profit margins) that have been recorded above all in sectors such as retail, hotels and restaurants and real estate." As a result, he said, the tax collection has improved.

What about the other main taxes paid to the public coffers? The most important of all taxes in terms of collection capacity is personal income tax (IRPF). Between January and October the people of Malaga paid up a total of 1.97 billion euros, practically the same as in the whole of 2023 (just over 2.07 billion), which is the most recent record. All indications are that this figure will be easily beaten by year end. The same is also expected for all of Spain given that the 109.53 billion euros that have been received in the first ten months of 2024 are close to the 120.28 billions for the whole of 2023.

As for IVA (the Spanish sales tax on goods purchased), the contributions of the last two months of the year are not required to set a new record for Malaga province. This is despite the fact that these last two months of the year are so important for consumption as well as for tourism in a place like Malaga. By October end IVA was standing at over 1.75 billion euros, already above the over 1.66 billions in 2023. In the country as a whole, the 81.68 billion euros collected for this tax on consumption between January and October is still below, although close to, the nearly 83.91 billions collected in 2023 - the previous record high.

For Jorge Onrubia what is happening with IVA sales tax collection in Malaga has to do with the powerful behaviour of consumption, which is driven by a significant floating population of tourists. Meanwhile, in the case of personal income tax, he believes it has been propelled by the "inflationary drag" recorded in recent years: if the Bank of Spain attributes almost half of the increase in tax revenue to the rise in prices, in the case of Malaga this impact may have been greater since, at the peak of the price rises that occurred after Russia's invasion of Ukraine, inflation in Malaga was recurrently higher than that recorded in Spain as a whole.

Corporation tax, personal income tax and IVA sales tax are the main taxes, the ones that raise the most revenue for the Treasury. These three taxes account for practically 95% of all the tax revenues collected by AEAT in Malaga. All three are at record highs, It is in the small-scale taxes where Malaga lags behind Spain as a whole. To begin with, in Non-Resident Income Tax, where there are doubts that it will be able to reach last year's record as the 171 million euros collected by October end fall well short of the 220 millions collected in 2023. In Spain, however, a new all-time high in this tax is assured. Perhaps this is due to the fact that Malaga is a province that attracts residents more than non-residents. Perhaps what is more striking is what is happening with special taxes (for instance, the additional tax on alcohol and tobacco, fuel and electricity), a concept for which Malaga has only received 15.64 million euros so far this year, a far cry from the 42.2 millions in 2023 and even further from the almost 190 million euros collected in 2007.