The government is studying increasing the levy on the interprofessional minimum wage (SMI) to 600 euros by 2026, so that the State assumes the fiscal cost of the increase proposed for next year and does not only weigh on employers.
According to ‘El País’ and well-informed sources have confirmed it to this newspaper, there is talk of updating the deduction put in place for the SMI this year (1,184 euros per month, or 16,576 euros per year), or 340 euros per year, to be presented in the 2025 tax return, which will be settled in the spring of next year.
Last Friday, the Ministry of Labor presented the report of the committee of experts on the SMI, which proposes an increase of between 3.1% and 4.7% (up to 1,221 euros gross or 1,240 euros per month) by 2026 to meet the objective that the SMI reaches 60% of the average net salary and that its purchasing power is maintained. The first scenario would be without taxation, while in the second the experts already consider that the minimum wage would be taxed as personal income tax. Updating the deduction to the amounts proposed this year would bring this figure to around 600 euros.
Traditionally, the government had updated minimum income tax exemptions with the amount of the SMI, but this year the Ministry of Finance decided that the fiscal cost of this measure was too high for public coffers. The updating of the tax-exempt minimum does not only concern SMI beneficiaries, but is transferred to the entire distribution, including the highest incomes who contribute in higher brackets.
Labor and Treasury avoid conflict
After a bitter debate between the two government partners, the Treasury proposed the creation of a specific deduction for SMI beneficiaries to be applied in the income tax return, so that their tax cost is lower and only applies to cases where the deduction would have been maximum (essentially, single people without children up to 35 years old). If the discounted deduction is not applied, in the lower part of the range the Treasury would absorb practically 100% of the salary improvement, while it would be around 80% in the highest range.
The Executive seeks to avoid at all costs the fight between partners at the start of the year. In her mission to the experts, the Second Vice President and Minister of Labor, Yolanda Díaz, asked them for two figures to increase the SMI, with and without imposition of personal income tax, so that it is the Treasury’s decision that tips the scales to one side or the other.
And the Treasury, which held back until the last moment the decision not to update the exemption from minimum income tax, also opened the door from the first moment to the expansion of the current deduction.
The objective of avoiding confrontation at all costs was also transferred to the SMI experts’ report. The Economy and Finance appointees presented a dissenting vote on the methodology used to calculate this year’s figure, although the figure remained as is, in the methodology, and was not included in the final document. The government has closed ranks with the experts.
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