The 2024 tax expenditure report, submitted to Parliament, indicates that “public administrations’ tax expenditure, in nominal terms, showed a rising trend from 2015 to 2024,” maintaining at 7.2% of GDP for the second consecutive year.
Among the types of taxes, VAT tax expenditure and income taxes (IRS and IRC) stand out, collectively accounting for over 80% of total tax expenditure.
In 2024, public administration tax expenditure increased by 5.7% compared to 2023, primarily “explained by the increases observed in VAT tax expenditure and IS, with changes of 415.5 and 335.1 million euros, respectively,” according to the report.
VAT accounted for 60.1% of tax expenditure, with preferential rates responsible for 98.6% of VAT tax expenditure.
VAT expenditure grew by 3.5% to approximately 12,250.2 million euros in 2024, according to estimates.
In IS, expenditure rose by 335.1 million euros compared to the previous year, translating to a growth of 25.2%, notably due to tax exemptions like the exemption for house purchases by young people.
Regarding income taxes, these represent about a quarter of total tax expenditure, showing an increase of 243.4 million euros in 2024 compared to 2023. This “resulted from both an increase in IRC tax expenditure and an increase in IRS tax expenditure (with variations of 134.1 and 109.3 million euros, respectively).”
In IRS, expenditure reached 2,755.3 million euros, up 4.1% from the previous year, due to “tax exemptions and deductions, which increased by 53.4 million euros (22.6%) and 41.5 million euros (6.5%), respectively, compared to the previous year.”
“The increase in exemptions predominantly resulted from the rise in tax expenditure associated with IRS Jovem and individuals with disabilities,” the report states.
Regarding IRC, the estimated tax expenditure by public administrations is 2,182.4 million euros, representing a 6.5% increase from the previous year.
This increase is linked to SIFIDE – System of Tax Incentives for Business Research and Development (with a tax expenditure increase of 114.5 million euros), as well as deductions from the taxable amount associated with the Fiscal Incentive Regime for Enterprise Capitalization (19 million euros in 2024).
