Government prepares income tax reduction for salaries of €33k or lower

The Catalan government is preparing a reduction in income tax (IRFP or Personal Income Tax) for people in Catalonia earning €33,000 or less in annual gross income.

The measure, first reported by Catalan public radio and later confirmed by the Catalan News Agency (ACN), has been backed by the pro-independence Esquerra Republicana de Catalunya party.

ERC previously proposed the measure when in government. It was included in the 2024 budget proposals, which fell through after being voted down by parliament.

Back then, left-wing En Comú Podem did not support the budget as they claimed there was a measure to finance the Hard Rock casino complex, which ERC rejected.

The parliament will need to back the agreement between the ruling Socialists party and ERC as they do not have an absolute majority to pass the reduction.

According to sources from ERC, the IRPF reduction would be one percentage point, lowering to 9.5%. Authorities say that three out of four contributors will benefit from the measure.

More recently, PSC and En Comuns Podem reached deals on several financial measures, including increasing the tourist tax.

Salvador Illa, the socialist leader, was backed by ERC and the Comuns parties in his attempt to become Catalan president in August.

Socialists and Esquerra praise "progressive" tax 

The leader of the Socialists' parliamentary group, Ferran Pedret, said the agreement "makes things easier" for low-income earners. 

"Anything that goes towards improving the progressive nature of taxation and making it more socially and environmentally fair must be welcome," he said.  

ERC spokesperson, Elisenda Alamany, said that the measure will be approved by the cabinet on Tuesday and will benefit 75% of people living in Catalonia. 

"It will be a relief to the lives and daily routines of families," she said. 

Pro-independence Junts per Catalunya welcomed the specific measure, but spokesperson Josep Rius expressed a desire to see the full fiscal package presented by the government. 

Rius also accused the government using the announcement of the tax reduction to cover up the "mess" of the Rodalies commuter train network. 

"It's no coincidence that this is being announced in a week when the issue of the Rodalies crisis is up for debate in Parliament." 

Candela López of left-wing Comuns endorsed Esquerra's deal with the government. 

"We believe that people who have difficulty making ends meet are the ones who should pay less tax," López said, adding that her party "will always be in favor of measures like these."

The conservative People's Party also view the move "positively." General secretary of the Catalan branch of the party, Santi Rodríguez, said that his party presented a similar bill to parliament because incomes below that threshold "pay the most taxes in all of Spain."

However, he criticized the government for making contradictory decisions. "In fiscal policy, it is not about patching things up but about having an overall vision," he remarked.

Far-right Vox described the agreement as "window dressing." 

"They announce tweaks to IRPF while raising the property transfer tax, which punishes the purchase of housing," spokesperson Joan Garriga posted on X (formerly Twitter). 

Measures to collect €219 million  

Late on Monday evening, Catalan economy minister Alícia Romero announced that the government will approve a package of tax and administrative measures through two decree-laws, allowing it to collect an additional €219 million.

One measure sets a 20% tax rate on property purchases from the so-called ‘big property owners’, or ‘gran tenidors’, who own ten or more properties. This is expected to generate €90 million.

Another measure eliminates the tax break for real estate companies on housing transactions, bringing in an estimated €85 million.

Lastly, the government will double the tourist tax in Catalonia, which is projected to secure another €90 million.

These measures are expected to compensate for the estimated €50 million loss from the income tax reduction.