Thursday, March 23, 2023, 01:03
Personal income tax is a progressive tax, which taxes those who earn more at higher rates. It happens that the income brackets that structure the withholding table are not automatically adjusted for inflation. That is why it can happen that a worker whose salary has been increased is taxed in a higher bracket of the tax. And if prices, as is the case now, rise more than wages, there is a loss of purchasing power.
To solve this problem, tax agencies resort to deflation. In practice, it implies modifying the personal income tax brackets to adjust the progression of the tax to that of the cost of living. This means that even if we charge more for a hypothetical salary increase, we will pay the same percentage of personal income tax.
In the case of the Bizkaia Provincial Council, this exercise applies a table of withholdings with a deflation of 2%. In the same way, the foral institution indicates on its website, “the rate applicable to the general taxable base is deflated by 2%”, and the reduction for joint taxation, the reduction of quota and deductions is increased by the same percentage. personal (descendants, ascendants, disability or dependency and age deduction)”. This deflation is added to the two that were already applied in the 2022 personal income tax (1.5% and 4%) by the Basque foral estates. With the same objective of dealing with inflation, this year it will be applied again an extraordinary deduction of 200 euros for people with incomes of less than 30,000 euros.
How much money will I save on the Income Statement
Taking all this into account, and according to the calculations of the Estudio Jurídico firm, a person with an income of 25,000 euros per year will obtain at least 245,50 euros (200 of the extraordinary deduction plus 45.50 for deflation) of savings in the Income Statement.
The deductions to which you are entitled based on your personal circumstances (if you have children, mortgage, rent, pension plan, etc.) will then be applied to this fee. The result will be the liquid base, on which the corresponding type will be applied.
For a taxpayer with an income of 50,000 euros, the savings in the full fee would be at least 268,40 eurosattributable only to deflation (the deduction of 200 euros does not correspond to earning more than 30,000 euros).
Ernesto Gordoa, an expert in tax law at Estudio Jurídico, warns that this saving “is nominal, because 25,000 euros are not the same in 2021 as in 2022 due to inflation.” That is why he relativizes the effect of deflation, although he does recognize the help that the deduction of 200 euros means for incomes of less than 30,000 euros.