Yes, I know, this not only happens in Spain, but as the following chart shows in order for somebody to take 1250 euros in cash home per month companies have to spend almost twice as much, 2,446.92.

In other countries in Europe this is also true, but not on such a low pay scale. What´s unusual about Spain is the enormous amount of taxes that the Spanish government collects from people who only take home 1250 euros per month. And after they are home with the cash they have to pay VAT when they purchase goods or services and many other indirect taxes. So even on a person who takes home a real net of around 1100 euros per month, his real earnings are 2,446.92 per month for an effective tax rate of 55%. What is interesting is that employees who take home a real net pay of 5000 euros per month, 10,000 euros per month and 15,000 euros per month also take home around half of what the company pays them. But the take is slightly less in percentage which makes socialist Spain quite regressive. The solution in my view is of course to lower taxes on the low income brackets and have the Spanish government be more effective in rendering its services.

Follow Martin Varsavsky on Twitter: twitter.com/martinvars

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