Economy New payroll tax for 2023: what is the MEI and who does it affect?

A new payroll tax has entered the scene in 2023

Economy New payroll tax for 2023: what is the MEI and who does it affect?

A new payroll tax has entered the scene in 2023. It is the Intergenerational Equity Mechanism (MEI) and is included as a measure in the bill to guarantee the purchasing power of pensions and other measures to reinforce the sustainability of the system. Let's see what it is and who it affects.

Approved in the first part of the pension reform and published in the BOE on December 28, 2021, the MEI represents a 0.6% increase in contributions for common contingencies, distributed between the company and the worker with the same distribution than in social contributions. Specifically, 0.5 of the contribution is paid by the company and 0.1% by the worker.

Thus, from 2023 the salaried person loses 0.1% of his net salary to be received, while the contribution of the self-employed is variable. For a median contribution base of around 2,000 euros in salary, this 0.6% increase established by the MEI would mean a monthly contribution of 12 euros, of which two euros would be paid by the worker and 10 by the company. For the self-employed, the average is around five euros.

The forecast is that the new tax contributes between 2,000 and 3,000 million euros per year to the Reserve Fund, known as the pension piggy bank, in case it is necessary to activate it. This adjustment mechanism, designed by the Minister of Social Security, José Luis Escrivá, is incorporated to try to balance the accounts in the coming years, coinciding with the retirement of the so-called baby boom generation.

In principle, this payroll discount will be in force for 10 years, until 2033. However, according to what Social Security points out, in the event that from 2033 it is appreciated in the Aging Reports of the European Commission " a deviation of the pension expenditure forecast for 2050 with respect to the 2024 report (which will be used as a reference), this Fund will be used, with an annual provision limit of 0.2% of the Gross Domestic Product (GDP)".

Likewise, if the assets of the Reserve Fund are not sufficient to sustain the system, the Government will negotiate with the social partners for its elevation to the Toledo Pact, in accordance with its recommendations, a proposal that, in a balanced way, is directed well to reduce the percentage of spending on pensions in terms of GDP, either to increase the contribution rate or other alternative formulas to increase income.

The extension of the MEI joins the increase in contributions of the maximum bases for 25 years above inflation and the extension of the calculation period to access the pension from 25 to 30 years, which generated a reaction of union rejection and in the left of the government.

If the Government intends to guarantee the purchasing power of pensions through mechanisms such as the MEI or the revaluation of benefits, the Institute of Spanish Actuaries (IAE) warns that these measures pose a certain risk of worsening the deficit of the system, which that would force in the future to seek more income for Social Security or cut pensions, or both.

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