- AIReF has updated its Technical Document on the variability of tax revenue, analysing tax receipts for the period 2019–2024 and presenting its forecasts for 2025
- It maintains its conclusions on revenue growth in 2021, 2022 and 2023
- In 2024, revenue growth accelerated again, rising by more than 8%, driven by economic activity, prices and the withdrawal of measures, which fully offset the refunds linked to court rulings
- For 2025, AIReF estimates that tax revenue will increase by 9.5%, again supported mainly by economic activity and prices, followed by the reinstatement of limits in Corporate Income Tax
The Independent Authority for Fiscal Responsibility (AIReF) today published an update to its Technical Document on tax revenue variability, analysing the factors that have driven revenue growth since 2019. AIReF has published this analysis annually since June 2023 to explain the unusual pattern in revenue, which has been shaped by high uncertainty linked to the post-pandemic rebound in economic activity, inflation, the wide range of fiscal measures adopted to counter its effects and, more recently, the impact of court rulings. In this update, AIReF revises its analysis of previous years and identifies the factors that drove revenue growth in 2024 and, based on its latest estimate, in 2025.
Specifically, AIReF identifies six components that affect revenue: the real component (linked to economic developments), the price component, the increase in the average effective personal income tax rate without changes to the statutory schedule, a component capturing various tax-related factors, the measures component (reflecting the impact of temporary or permanent regulatory changes), and an unexplained variability component, which covers changes not attributable to economic activity, the tax structure or regulatory amendments.
This update incorporates the latest available data and methodological improvements. AIReF maintains its conclusions for 2021, 2022 and 2023. In particular, it notes that in the immediate post-pandemic years—2021 and 2022—revenue growth exceeded 14%. With the new data, the main conclusions remain unchanged. In 2021, 46% of revenue growth was driven by the real component, which boosted both direct and indirect taxes. By contrast, in 2022 the price component became the main driver, accounting for 45% of the increase, with a particularly strong impact on VAT.
In 2023, growth moderated to 6.4%, supported evenly by prices and the real component. Measures added around one percentage point, mainly due to the partial reinstatement of the tax on the value of electricity production and the limits on the offsetting of intra-group losses in Corporation Tax.
2024 and forecasts for 2025
In 2024, revenue growth accelerated again, rising by more than 8%. This increase was driven in similar proportions by the real and price components and was also shaped by the adoption and withdrawal of measures, as well as by court rulings. Overall, 85% of the growth was explained by macroeconomic variables: the real component accounted for 37% and the price component for 34%. The increase in average wages raised the average effective PIT rate, contributing a further 14% to revenue growth. Regulatory measures reduced growth by 7%, as the limits on the offsetting of intra-group losses in Corporation Tax were no longer in force, although this effect was partly offset by the reinstatement of effective VAT rates. Finally, other tax-related factors account for 9% of year-on-year growth. Strong growth in withholding on capital income and investment funds under PIT offset the refunds paid to mutual society members following the Supreme Court ruling.
In VAT and Corporation Tax, part of the increase cannot be attributed to any of the identified factors. This unexplained component peaked in 2021, declined gradually in 2022 and 2023, and then rose again significantly in 2024. In the case of VAT, the unexplained variation reflects the divergence observed since 2021 between VAT-liable final expenditure and domestic demand. This gap remains sizeable despite the revisions to the annual National Accounts. In the case of Corporation Tax, the unexplained component reflects the gap between the tax base and gross operating surplus. It mainly highlights the difficulty of capturing certain tax features—such as double taxation relief and the offsetting of tax loss carry-forwards—through standard economic variables. Unexplained variability peaked in 2021 and declined gradually until 2023. However, it rose again in 2024, driven by a disconnect between the accounting profits of large companies and consolidated groups and gross operating surplus, as well as by a divergence between consolidated tax bases and their instalment payments.
AIReF forecasts that tax revenue will grow by 9.5% in 2025, driven in similar proportions by the real and price components, followed by measures affecting Corporation Tax. Specifically, the real and price components explain 32% and 38% of the increase, respectively, while the rise in the average effective IRPF rate contributes a further 11%. Regulatory measures account for 27% of the increase, reflecting the reinstatement of limits in Corporation Tax under Law 7/2024 and the full restoration of VAT rates. By contrast, other miscellaneous tax items will subtract 9%, owing to the substantial outlays linked to the court ruling in favour of mutual society members.
By tax
Following the pandemic, the main driver of Personal Income Tax (IRPF) growth in 2021 and 2022 was higher employment. Subsequently, in 2023, 2024 and, according to AIReF’s estimates, 2025, wage and pension increases have been the main contributors to revenue growth. The increase in Corporation Tax revenue in 2021 and 2022 reflected the recovery of all its components, whereas over the past three years the adoption and subsequent withdrawal of measures have played a more decisive role in shaping revenue developments.
In the case of VAT, the decline in consumption and investment volumes in 2020 and their subsequent recovery in 2021 largely determined revenue performance in those years. Since 2022, price increases have accounted for most of the growth, although in 2023 this effect was offset by the rate cuts introduced that year. In 2024, revenue was driven by consumption, prices and the gradual reinstatement of tax rates—factors that will once again support revenue growth in 2025.
The fall in consumption volumes in 2020 shaped the evolution of excise duties, whose recovery was slower than that of other taxes and which, since 2021, have been affected by the introduction and subsequent withdrawal of measures adopted to mitigate the rise in energy prices. In 2023, a new tax on single-use plastics was introduced, increasing the contribution of the measures component. In 2024, the gradual withdrawal of the reduction in the electricity tax pushed excise duty growth up to 6.6%. In 2025, excise duty revenue is expected to grow by 5.6%, with the price component contributing 4.7 percentage points of the total, in a context where electricity prices rose by 4.2% year-on-year after two years of sharp declines.
