2020 Catalan Budget to Drop Taxes on Lowest Incomes and Raise them for Higher Earners

The Catalan government (JxCat-ERC) and Catalunya en Comú Podem have reached an agreement on the 2020 Catalan budget on the part of the spending plans relating to income. The agreement includes drop in income tax for people on the lowest wages, and an increase for those on higher incomes. The inheritance and wealth taxes will also be modified, and a new tax on energy companies will also be introduced.

Income Tax

The deal establishes that taxes on the lowest earners will drop significantly. Almost half of the salary of those earning less than 12,450 a year will be exempt from income tax.

Those on higher incomes, however, will pay more: those earning between €90,000 and €120,000 a year will pay 23.5%, while those earning between €120,001 and €175,000 will pay 24.5%.

These measures will provide an extra 543 million euros a year to the income for the Catalan government.

Inheritance tax

Except when it comes from a spouse and when the inherited amount doesn’t reach €500,000, the discounts in the tax will now be lowered progressively as the amount inherited increases. Thus the discount will be 60% for those inheriting up to €100,000, and no discounts will apply for those receiving more than €3 million. 

New ‘green’ tax

This tax will affect power companies producing, distributing and storing energy, but those operating with renewable energies will be exempt.

Other taxes will be payable by owners of empty flats and producing canned sugary drinks to reduce the consumption of such soft drinks.

The Catalan government-Catalunya en Comú Podem agreement is only for the part of the budget relating to income. Both sides will continue to hold talks in the coming days and weeks, in order to try to find consensus on the budget’s section on spending.

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