Corporate taxation in Spain: analyzing efficiency and revenue potential

Abstract

This paper offers a comprehensive analysis of Spain’s corporate tax system through the lens of the Laffer curve and Buoyancy index, assessing its efficiency in generating revenue. The study finds that Spain is nearing the Laffer curve’s optimal tax rate, beyond which tax revenue may decrease with rate hikes. The Buoyancy index reveals a fluctuating response of tax revenues to economic shifts, indicating vulnerability in economic downturns. We trace Spain’s corporate tax evolution, examining current structures and recent policy reforms, and explore how corporate taxation influences economic activities and investment. The paper proposes policy recommendations, including reassessing the corporate tax rate, advocating structural reforms for a wider tax base, and policies promoting economic growth. Emphasis is placed on counter-cyclical fiscal policies, regular evaluation of tax incentives, improving tax compliance, and Spain’s role in global tax coordination. This research contributes to fiscal policy discussions, advocating a balanced tax approach for sustainable economic development and guiding policymakers toward resilient fiscal strategies in a dynamic economic environment.