Page 69 - Economic report 2020

Revenue from indirect taxes has and the highest figure in the historical series.
recovered pre-pandemic levels This entry is still by far the most important
and reached a historic high. source of finance for the Government, with
a percentage of total non-financial income of
58.4%, 1.3 points more than in 2021, although
it did not regain the volume it had in 2019 (64.9%) due to the strong increase in direct taxes.

Growth in 2022 can be explained by the positive contribution from the two main forms of indirect
tax, value added tax (IGI) and the tax on foreign consumption, which were precisely among those
most impacted by the pandemic restrictions. Moreover, two new forms of tax were introduced
this year: the tax on stays in tourist accommodation (which collected €2.7 million, less than
half of the budgeted amount) and the tax on CO emissions, which taxes hydrocarbons according
2
to their carbon dioxide emissions (€9.3 million in revenue, exceeding the initially budgeted figure).
The indirect taxes for which revenue has fallen are: the property transfer tax (ITP) (despite
maintaining historically high absolute values due to dynamic real estate transactions), special taxes
and the tax on provision of insurance services (ISI).

Specifically, the increase in revenue from IGI, the tax on consumption in force since 2013 and the
most important tax form by volume of revenue, was 29%, to a net settled figure of €148.6 million.
As for consumption tax, which is a customs duty on agricultural products imported into Andorra
(import chapters 1 to 24), with a notable percentage on imports of beverages and tobacco, this
increased 51% and obtained revenue of €110.8 million (the second most important form of tax).
Note that this increase is directly linked to the upward trend in food imports which, in turn,
reflects the recovery in household consumption and the number of visitors.
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Special taxes saw a slight downward trend compared with revenue in the previous year (-3%).
These taxes are imposed on the importation and manufacture of specific products, such as
alcohol, tobacco and hydrocarbons, so growth in 2022 is linked to the trend in imports of these
products. However, note that, on entry into force of the CO emissions tax, the rates applicable
2
to special taxes linked to hydrocarbons have been reduced, affecting the overall revenue from
this tax.

The other indirect taxes, with a lower percentage of total revenue, showed different trends. On
the one hand, note the reduction in revenue from the ISI tax (-1%) and ITP tax (-7%), after a very
positive year in 2021 for the real estate sector. On the other hand, significant increases occurred
in the common tariff on foreign trade (+29%) and gambling tax (+55%).

Investment income saw a slight increase of 1%, to €28.2 million. Note that, this year, revenue
associated with putting euros into circulation among the country’s banks is recognised in the
chapter of investment income, whereas until now, it was recorded in chapter 9 as financial liabilities.
This reclassification is in keeping with the fact that the Government assumes no liability relating
to this circulation of money. This budget chapter usually records its most important settlements
through the distribution of dividends from public corporations (mainly Andorra Telecom and
the electricity company FEDA) and other investment income such as the marketing of euros to the
philatelic and numismatic trade. In 2022, the main change in investment income is associated with Andorran economy: general developments | VIII. Public sector
the increase in the amount from Andorra Telecom dividends, as FEDA did not pay dividends.

On the other hand, taxes and other income increased 62.2%, mostly due to the increase in
confiscations. Finally, note the decline in current transfers to the almost insignificant amount of
€50,857. This is related to the contributions made by the Comú governments to the Solidarity
Fund in 2021, to tackle the Covid-19 health crisis. This revenue should be considered one-off. In
the case of sales of real investments and capital transfers, zero revenue was obtained.