A new report has suggested the Spanish tax system could be creating disincentives that make starting a family harder in the country.
The Spanish tax system could be contributing to the country’s low birthrate, a study has revealed.
Spain’s declining birthrate has been a concern for some years, with long-term demographic change causing concern about the future of pensions and the welfare state.
In 2023 Spain had its lowest birthrate in 8 decades and experienced population decline every year from 2017 until 2025 when the number of babies born rose slightly for the first time in over a decade.
Now the OECD says the inner-workings of the tax system could be partly to blame, with thresholds creating disincentives for starting a family.
READ ALSO: The real reasons why Spaniards don’t want to have children
Spain is one of the OECD countries that offers the lowest ‘tax preference’ for families with children, with one of the smallest differences between the so-called ‘tax wedge’ – the impact of income tax and social security contributions on gross wages – applied to families with children and that applied to single people without children.
According to the latest edition of the Taxing Wages report published by the OECD: “In Spain, income tax and employer social security contributions combine to account for 88 percent of the total tax wedge, compared with 77 percent of the total OECD average tax wedge.”
Taxes and social security contributions now take 41.4 percent of the gross salary of an adult without children earning the average wage in Spain, 6.3 percentage points more than the OECD average, which stands at 35.1 percent, placing Spain as the tenth country out of the 38 with the highest tax burden.
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The increase in the tax wedge in Spain was mainly due to the impact of personal income tax, rather than social security contributions, and comes on top of the effect of inflation on families’ purchasing power, which has reduced their ability to buy.
Pay rises do little to help families or those thinking of starting families, either.
In 2025, gross wages for employees rose by an average of 3.8 percent, but when the impact of inflation is factored out, real wages rose by just 1.2 percent — an increase that amounted to nothing, given that the average tax rate rose by 1.5 percent, leading to a 0.3 percent loss in purchasing power.
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Only seven countries across the OECD experienced this phenomenon, including Spain, according to the report.
The tax wedge for families in which both adults work and who have two children stood at 38.7 percent if one earns the average wage and the other earns the equivalent of 67 percent of that, or at 40.3 percent if both earn the average wage.
In the case of a family consisting of two adults where only one works, with two children, tax takes 36.8 percent of income.
Although in all three cases this is below the average tax wedge for a single adult without children, the difference is among the smallest in the entire OECD, leaving a ‘tax preference for families’ of just 4.6 percentage points on average.
This is half the OECD average (9 percent), the ninth lowest in the OECD and the fourth lowest in the EU, behind only Greece, Finland and Sweden, something experts say could be interpreted as a potential tax disincentive to childbirth in a context of an ageing population and declining birthrates.
READ ALSO: Older and more diverse: What Spain’s population will be like in 50 years
