A report by Pimec reveals that for every €100 a company raises a worker's salary, between €44 and €52 goes to the public coffers due to income tax and social contributions. The employers' association is calling for an update to the tax brackets and reductions.
Half of the salary increases that companies have implemented in recent years end up in the hands of the Treasury. This is highlighted in a report by the Catalan employers' association Pimec, presented on Monday, which attributes this phenomenon to the lack of income tax updates in relation to inflation.
According to the study, for every €100 a company increases an employee's salary, the worker receives between €48 and €56 net, depending on their income level. The rest, between €44 and €52, is allocated to income tax and social contributions.
The president of Pimec, Antoni Cañete, described the situation as “unjust” during the report's presentation. “Companies are making a salary effort to counteract the rising cost of living, but a large part of those resources ends up in the Treasury,” he pointed out.
The report uses the example of an average salary of €30,000 per year that would have been updated according to the CPI between 2020 and 2025. In that case, the worker would have lost 3% real purchasing power due to the increase in the tax burden within the income tax.
Pimec breaks down the causes of this effect. 58% of the loss comes from the freezing of income tax benefits, which have not been modified since 2015. The remaining 42% is due to the progressivity of the tax brackets, which have not been adjusted to the new salary scales.
The employers' association is demanding that the government update both the income tax brackets and the reductions in the tax rate to align them with accumulated inflation. Otherwise, they warn, there is a “hidden” increase in the tax burden that penalises workers and companies that raise salaries.
For readers interested in taxation or salary negotiations, this report serves as a warning: a salary increase agreed upon in a collective agreement or initiated by the company may not translate into a real increase in purchasing power if the effect of income tax is not taken into account. In practice, the worker only perceives approximately half of the gross increase.
The context is well known: accumulated inflation since 2020 has exceeded 15%, while income tax brackets and personal deductions have remained virtually unchanged. This results in workers who have received raises to compensate for inflation jumping to higher tax brackets or losing tax benefits.
Pimec does not propose a tax cut, but rather an automatic indexing of income tax parameters to inflation, as is already the case in other European countries. This way, it would prevent the state from benefiting from an increase in revenue that was not intended by the legislator.
The report arrives at a time of debate about tax pressure in Spain, where income tax collection has reached historic highs in recent years. The employers' association insists that the solution lies in a structural reform of the tax, rather than temporary fixes.
So far, there has been no official response from the Ministry of Finance to Pimec's requests. The employers' association hopes that the report will serve to open negotiations with the government regarding the upcoming General State Budgets.
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