Tax office in Palma, Mallorca

The tax office on the Llevant estate in Palma. | Miquel À. Cañellas

Majorca Daily Bulletin reporterPalma23/02/2022 08:00
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It is estimated that taxpayers in the Balearics will face an average increase of 215 euros when it comes to settling income tax bills for 2021. The reason is inflation, which stood at 6.5% at the end of last year and for which the Spanish government has not adopted mechanisms to mitigate the effect on tax bills.

Sometimes referred to as "bracket creep", the increase in tax results from deductions or exemptions not being inflation-adjusted, and personal income tax, because of its progressive nature, is most sensitive to this.

In all, it is calculated that Balearic taxpayers will pay the treasury an additional 115 million euros, the 215 euros average being the third highest among Spain's regions. In Madrid this is put at 240 euros and in Catalonia at 231 euros. The national average is 199 euros.

José Félix Sanz, professor of applied economics at Complutense University in Madrid, says that it is to be expected that the Balearics should be one of the most affected regions - "The higher the income and the higher the tax base, the greater the tax impact due to inflation. It is normal that tax rises most in the wealthiest regions."

Citing Milton Friedman, the professor refers to inflation being a tax "without legislation". It is an increase which is usually to the liking of governments. "It is an advantage because you get a very significant increase in revenue without doing anything. You're capitalising on the profit."