Cepyme points to labor charges and tax pressure as the main brakes on business growth

MADRID, 12 Dic.

Cepyme points to labor charges and tax pressure as the main brakes on business growth


The Spanish Confederation of Small and Medium Enterprises (Cepyme) points to labor charges and tax pressure on companies as the main brakes on the growth of the business fabric in Spain, as concluded in its report "Business growth. Situation of SMEs in Spain compared to that of other European countries", published this Monday.

The Spanish company has, on average, 4.8 employees, below the 6 workers in the European average and far from figures such as those of Germany, with 12.2 employees, or the United Kingdom, with 9.

Spain is among the five European countries with smaller companies. Among these, there are also the Netherlands, with 4.7 workers; Belgium, with 4.4; Italy, with 4.2 employees per company, and Portugal, with 3.8, according to Cepyme in its report, based on Eurostat data from 2019.

Cepyme maintains that if the Spanish company converged in size with the European one, the country's productivity would grow, since the Spanish fabric is made up of 99.24% small and medium-sized companies (SMEs), compared to 98.85% European.

"The growth of business size is not just a problem for Spanish companies, but it must become a matter of State, since it affects the competitiveness of the entire country," claims the Confederation in a statement, and points out that promoting the growth of companies would lead to an increase in wages and productivity.

Cepyme specifies that SMEs, due to their high participation in the business fabric, are also responsible for a large part of the employment created. The number of employed in Spanish SMEs represents 55.6% of the country's total, again in line with neighboring countries, such as Italy, with 62.8%, and Portugal, with 59.9%. The European average of employed in SMEs is 46.9% of the total.

Cepyme calculates that the expansion of the average size of the Spanish company would also contribute to the reduction of unemployment, with the creation of 1.3 million more jobs.

The sales figures per company in Spain are also among the lowest in Europe, with 1.1 million euros, a figure similar to that of Italy. The European average, in this case, is estimated at 1.5 million euros.

Cepyme considers that a larger company would increase sales by 268,500 million euros and would help expand the wage bill by 32,000 million euros, with an increase in revenue of 22,000 million euros.

Cepyme assures in its report that the Spanish company is still behind the European average because there are "more than 100 tax, labor, accounting, financial, insurance and competition regulations that discourage this growth".

Among the obstacles to the growth of the Spanish company, Cepyme cites the "sum of social contributions and other labor costs", which means that the minimum cost of hiring an employee is, for companies with between 10 and 49 employees, equivalent to 136 % of the minimum wage.

The Minimum Interprofessional Wage (SMI) is another of the obstacles that Cepyme identifies as ballasts for the growth of the Spanish company. Between 2017 and 2022, the SMI has increased by 41.3% and is now equivalent to 54.8% of the average Spanish salary, according to the report.

To the revaluation of the SMI, Cepyme adds the increases in social security contributions of the last five years, with an increase in the minimum contribution bases by more than 40% and in the maximum bases by nearly 20%.

Cepyme concludes that these changes in contributions and salaries affect SMEs in a special way, "labor costs have registered growth in recent years of more than 6% per year, losing competitiveness with our neighboring countries."

Faced with this situation, Cepyme once again defends the need to increase the size of the Spanish company to guarantee better wages and greater productivity. The report collects data on the average salary in Spain between 2011 and 2019 for companies with more than 200 workers, which was between 42% and 49% higher than in SMEs with less than 50 employees.

Cepyme also criticizes in its report the obligation to set up a Works Council from 50 workers and regrets that the legal minimum number in Spain is higher than in other European countries. In this way, a Works Council in an SME is made up of 10% of its workers, while in large companies it is made up of a maximum of 3.4% of its workforce.

The tax system also blocks, for Cepyme, the growth of SMEs, with "the third highest social contributions in Europe and corporate taxes and income tax among the highest on the continent."

In the case of personal income tax, Cepyme considers the average of the maximum rates of the 15 autonomous regions under the common regime, with a marginal rate of 50.1%. For Cepyme, this figure is "a hindrance for the economy as a whole" and more "for the growth of SMEs, since it makes it even more difficult to attract talent."

Despite the problems that it lists in its report, Cepyme also recognizes that more companies are created in Spain than in other European countries.

The Spanish entrepreneurship rate was 33.7% in 2019, according to Eurostat data analyzed by Cepyme. Only Hungary, with a rate of 121.8%, and Portugal, with 41.5%, surpass Spain, which is in line with the 33% average for the European Union.

Spain is also close to the European average in the case of the business birth rate, which studies the relationship between nascent companies and active companies. The European Union average is 10.4%, while the Spanish registers 10.1%.

However, Spain is far from the European average in business mortality. The rate of companies with employees who disappear and those that are active is 7.9% in the European Union, while in Spain it amounts to 9.3%.

Cepyme includes in its report a series of proposals to promote the growth of Spanish companies.

In the enumeration it includes that the fulfillment of the obligations does not have an immediate character with the expansion of a worker in the workforce, but that they enter into force when they have consolidated their growth, that is, after four years of increasing and maintaining their size.

For Cepyme, this flexibility would provide the company with its stability to assume the new charges and ensure its size, since, until now, SMEs try to "dodge the step" of 50 workers to avoid new charges.

The Confederation also proposes the establishment of tax mechanisms and measures that favor and facilitate investment in Spanish SMEs, through significant tax deductions.

Likewise, it advocates promoting legal certainty and transparency of operations, as well as measures and temporary aid that promote and make the merger of companies "very attractive".