WHAT ARE THE TAXES OBLIGATION OF COMPANIES?

The state needs to raise money in order to pay public services. The fiscal oblications of
companies are all the payments (taxes and contributions) that companies have to do and that
we can classify them into two: Those that have to be paid directtly and those where firms act
as intermediary.

A tax arises when wealth is generated. Well, a salary means that wealth has been generated
and therefore there are taxes that must be paid. That wealth generated is double. On the one
hand for the worker in exchange for his work and on the other for the company that will have
obtained a benefit from that paid work.

Thus, there are tax obligations for both the worker and the company, but they are all paid by
the company. Those that correspond directly to the company and those that correspond to the
worker (here the company acts as an intermediary).

Although it is not certain that wealth will be generated by the company because the future is
uncertain and companies take risks without knowing if they will be rewarded. Although in the
case of companies it is not certain that wealth will be generated because the future is
uncertain and companies take risks without knowing if they will be rewarded. On the other
hand, since there is an employment contract, what is certain is that the worker will see his
work rewarded with his salary.

Tax obligations of companies.

-Corporation tax (25%)

-The contribution of the company by workers (30%)

Companies and workers have to support the Social Security. It means that all the cover shell
that the SS offers is paid by them but companies pay much more than workers. The question is
that the firm pay its part directly and also acts as intermediary paying the worker´s part.

2000 euros 30% (600)

Tax fraud (when a company try to avoid paying this percentage of the worker´s wage)

Both companies and citizens pay taxes based on their economic capacity. This is demonstrated
according to our income, according to our assets and according to our expenses. Income is the
wealth we generate (business profits and workers' salaries). In the case of companies, they
make various types of payments to the state. Some based on the wealth it generates and
others acting as an intermediary. On the other hand, public services are of a very varied
nature, but a very special one is social security. Social Security in Spain is the main social
protection system that the State has to guarantee citizens a series of minimum benefits so that
they can face certain situations (illness, work accident, disability, unemployment, retirement ,
etc.)

Tax obligations as an intermediary

Fiscal obligations that workers and consumers have to pay to the state but it is the company,
acting as an intermediary, the one that carry out the payment.
Personal Income Tax: all of us who work have to pay this tax, even the self employed.
Company takes the percentage from our wage and gives it to the State (this money never
enters to our current account).

2000 euros gross wage

30% 600 company contribution

15% 300 personal income tax

6,5% 130 worker contribution

1570 net salary

1030 fraud tax

Worker´s social contribution. A 6.5% of the gross salary taken by company and gives to the
state (never enters our current account).

How much is saved by company if it commit a tax fraud? The company is left with 1030 euros
that are not paid to the state.

VAT (VAT) Value Added Tax -IVA-: Every time we buy a product we have to pay a tax of 21% of
the value of the product.

Movile 200 euros

21% IVA tax

242 final price

The company will give the State 42 euros and will keep the 200 at which the phone was valued

What is tax fraud?

Violation of a tax rule with the objective of evading the payment of a tax through deception.

In Spain it is estimated that taxes worth 26,000 million euros are not paid. This tax fraud raises
some problems.

First- If no one pays taxes, the State would not be able to help people with few resources. So
people who don't pay taxes are stealing your money.

Second- Committing tax fraud leaves workers unprotected. But since you do not have a
contract, you do not have the right to receive unemployment benefits if you lose your job.

This is a real disaster for the worker. Since you do not have a contract, you are not entitled to
unemployment benefits; If you lose your job, your pension will be much lower, and if you have
an accident at work you will not have any insurance because, in theory, you are not working.

THE STATE
When a student finishes high school, what would be ideal? Let him study what he likes most,
but there are families who cannot afford it. That is when the State appears. The state helps in
times of need.

The state is a set of organizations that makes decisions seeking the well-being of citizens and
improving the life of the society in which we live.

These organizations are classified into three administrations.

The local administration is the closest to the citizen and the one in charge of the services
that most influence our quality of life.

Community wellness. That is, water supply, garbage collection, sidewalk repair, lighting and
street cleaning.

Citizen safety and security. That is, the local police and traffic matters.

Living place. It refers to providing social housing for the most disadvantaged.

Culture. Such as libraries, municipal theaters, festivals or cultural centers.

Other expenses. Like caring for parks and gardens.

Regional administration is mainly in charge of everything related to health and

education. Building hospitals, hiring personnel, medical devices, medicines... represents a
significant public expense.

Build schools, institutes, vocational training centers, hire staff, materials...another important
public expense.

Of course in both areas, the higher the expense, the better health and educational services
citizens will have.

Central Administration (the government). It is the administration that has the

greatest number of functions and therefore also the one that spends the most money. These
decisions are made by the president of the government. We highlight:

It is responsible for preparing all the laws that citizens and companies in the country must
follow. Laws such as the ban on smoking in public places or against pollution from companies
are made by the government.

Assumes the costs of large infrastructure (roads, train tracks, airports)

It is in charge of defense (army and national police) and foreign relations.

Provides social insurance. Social security is one of the main functions carried out by the
government and accounts for a large part of its expenses, which is why it has its own budget
and administration.

SOCIAL SECURITY
Social Security is the protective action of the State with all citizens. In addition to providing
healthcare to everyone, its main function is to help in case of need. It means helping when for
different reasons a person does not have income. These reasons are:

A temporary disability (due to illness, maternity, accident). You can't go to work. In these
cases the SS pays all or part of the salary.

Inability. If for some mental or physical reason we have permanent difficulties in accessing a
job or continuing to do our job. The state will help us financially.

Unemployment. If you are fired or your contract ends, the state will help you for a time so
that you do not have financial difficulties while you find another job.

Retirement. When we reach the age established by law we have the right to receive a fixed
monthly income. Thus, when we are older and can no longer work, the state helps us
financially.

There may be debate on each of these issues and it will depend on the national economic
situation but also on ideology.

The duration and amount of state assistance will depend on the circumstances of the person
concerned.

The duration and amount of state assistance will depend on the circumstances of the person
concerned. And of course, the more the state spends on social security, the less likely it is that
a person will be in poverty.

Some of these benefits such as pensions and unemployment are contributory, that is, the
more I contribute (in time and in quantity), the more aid I will receive in the event of becoming
unemployed or retiring.

Therefore, in order to receive a good amount of pension or aid if I become unemployed, it is

necessary to contribute. If I work without a contract, the employer saves paying these
contributions, but I am left without rights.

WHY DOES THE STATE INTERVENE?

It can be stated that companies perform important functions for every society. Thanks to
companies, many goods and services are produced that we can enjoy buying in the markets
and have a better quality of life.

The problem is that sometimes companies have actions in the markets that society does not
want or considers unfair. When this happens we say that there is a market failure and the
State must intervene.

In all countries, the State intervenes, it does not matter if we are talking about the United
States, Spain or Sweden. But the question is, is it necessary for the economy? There is an
intense debate about whether the State should intervene a lot or a little, but everyone agrees
that a minimum of intervention is necessary for several reasons:
The need for public goods
A PUBLIC GOOD is one that many people can use at the same time and that is also difficult to
make them pay for it. Companies do not produce these goods that we all want because they
are not profitable.

If the State does not do it, it would be very difficult to build these very necessary public goods
for the entire community, goods that undoubtedly increase our quality of life and companies
are not willing to produce because they are not profitable.

Most people understand this point perfectly, no economist questions that it is necessary for
that the State to produce these goods.

Regulate the market

The State sets rules that both workers and companies must respect to avoid any type of abuse
from any side: pollution generated by companies, price-fixing agreements that would harm all
consumers, rights of all workers (vacations, salary minimum... .)

DEBATE. There are people who think that the more rights have workers the less they will
produce because less effort they will do to getting better their situation.

Equalize opportunities.
It is impossible to avoid that there are people with more money than others. There are jobs
that are better paid than others, there are more qualified people and there will always be
those who earn more money. The problem is when being born into a family with fewer
resources can prevent you from developing your potential and does not allow you, for
example, to study the career you want or train to work in what you are qualified for. In fact,
according to numerous studies, 55% of children of parents with a low educational level do not
access higher education, so they end up earning less money. In other words, poverty would be
passing from parents to children.

It is crucial that the State guarantees that everyone has the same opportunities for
development. For this, education, health and social security are key.

Without health and education, those born into poorer families would have difficulty accessing
good jobs and would be condemned to a life of poverty. - "Bad luck" would be the answer in
the United States.

Avoid crises or help get out of them.

We know that capitalism produces inequality and generates cyclical crises. When we are in
crisis, companies do not sell and have to lay off workers, which is why many families stop
having income. In times of crisis, the state helps both workers and companies with problems
so that they continue buying and producing so that they can get out of the crisis as soon as
possible.
WHO PAY TAXES AND WHY?
Many people think that it is unfair that if they earn more money they have to pay more taxes
and this is because they consider that if they earn more it is due to their effort and if they pay
more that effort is being punished. Is it really just a matter of effort to earn more money? The
reality is that earning more or less money in most cases has nothing to do with effort. In many
cases, earning more or less money has nothing to do with the effort or difficulty of the work
carried out, but simply with what the market establishes (Let's think about what a footballer
earns and what a doctor earns). There is a general consensus that it is fair that whoever
studies more should earn more but the problem is that people who are born into low-income
families do not have the same opportunities to study as the rest and we must also add that
you can also be good at your job, even the best, but your work is not well paid by the market.
Therefore it is fair that those who have more help those who have less. Thus, based on the
principles of economic capacity and solidarity, greater equality is achieved.

Sometimes therefore one can earn less, not because you do your job badly, but because for
some reason that job is less paid or because you have had fewer opportunities than the rest.
So it seems fair that those who have more, pay more taxes in order to try to help those who
are not fortunate enough to earn that much. The principle of solidarity applies here.

In addition to the social contributions that cover social security and its benefits, we have to pay
other taxes because there are many other needs that must be covered, such as education, the
police, the construction of infrastructure... Thus, if everyone benefits from these public
services, do we all pay the same? No.

We pay according to our economic capacity, which depends on our income, our assets and our
expenses. Therefore, the higher our income, our assets or our expenses, the more taxes we
are going to pay. This is called the principle of economic capacity.