Madrid and Barcelona were the two provincial capitals that generated the most revenue per inhabitant from local taxes in 2023, with a figure nearing €1,000 per capita, according to a study by the Registry of Tax Advisor Economists on local taxation in 2024.
The report, authored by the specialist taxation body of the General Council of Economists of Spain, examined the taxes and levies that finance local coporations, the taxation authorities of local councils, how provincial capitals exercise these powers and tax collection efficiency.
The organisation highlights the "significant" differences in local tax payments across cities. In Madrid, the highest-paying city, residents contribute €1,001 per inhabitant, while in Pamplona, the lowest, they pay only €435 – a difference of €566.
Following Madrid at the top of the list of provincial capitals with the highest tax payments are three Catalan cities: Barcelona (€978 per inhabitant), and Tarragona (€917 per inhabitant) and Girona (€901 per inhabitant).
These are followed by Toledo, at €874 per inhabitant; Soria (€864 per inhabitant); Lleida (€862 per inhabitant); and Segovia (€843 per inhabitant). In contrast, Pamplona (€435 per inhabitant), Jaén (€492 per inhabitant), and Badajoz (€508 per inhabitant) are the provincial capitals with the lowest local tax payments.
The IBI, the most numerous
The publication by the Registry of Tax Advisor Economists reveals that local councils derive 66% of their local tax revenue from Property Tax (IBI), a compulsory annual tax over which they have significant regulatory authority.
Among the other two compulsory taxes, also collected annually, the Tax on Economic Activities (IAE) contributes a modest 8% to total municipal revenue, although it is hindered by various exemptions.
The Tax on Mechanical Traction Vehicles (IVTM), paid by the holder of the vehicle registration certificate, accounts for 11% of local revenue. Some town councils have attracted large vehicle fleets by setting very low IVTM rates.
The optional Tax on Construction, Installations and Works (ICIO) faces challenges in assessing and revising its tax base. During the real estate boom, it contributed significantly to municipal revenues, but its current share has decreased considerably, now representing only 7% of local income.
The Tax on the Increase in Value of Urban Land (IIVTNU), commonly known as the municipal capital gains tax, has faced significant controversy in recent years. Certain provisions of the tax were declared unconstitutional, leading to reforms in 2021, which introduced substantial regulatory differences. This tax now contributes 8% of municipal revenue.
As for municipal taxes, which account for 28.6% of the total tax revenue of local governments, many are levied on the same services or the same use of public assets. However, the methods of taxation vary significantly from one case to another.
Additionally, the tax experts from the General Council of Economists have highlighted the issue that only some local councils have economic-administrative bodies. In towns without such bodies, taxpayers who disagree with a local tax assessment must go directly to contentious administrative proceedings, as they lack access to free economic-administrative reviews. This often deters taxpayers from pursuing legal action due to the high costs associated with court proceedings.
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