A tailor-made suit for Catalonia will deduct a fifth from regional funding | economy

The Generalitat has brought out the heavy artillery and launched a directive on financial matters: asking the central government to exchange 100% of the taxes collected in the territory in exchange for a contribution similar to the Basque quota, which means deducting a little more than 20,000 million euros each year from the regional funding.

The Generalitat has brought out the heavy artillery and launched a directive on financial matters: asking the central government to exchange 100% of the taxes collected in the territory in exchange for a contribution similar to the Basque quota, which means deducting more than 20,000 million euros from regional funding each year, close to 20% of the total resources the system receives. has

The plan, a long-standing demand launched on Tuesday by the Pere Aragonese government after regional elections were brought up, is based on the premise that Catalonia receives only half of the resources generated in the region through taxation. , occur in other regions. According to statistics provided by the Generalitat, the collection of all taxes paid in the region is 52,000 million euros annually, the resources provided by the regional financial model do not exceed 25,000 million. Through the proposed scheme, this gap will be rectified and in return, a series of resources will be contributed to a solidarity fund designed to develop the less financially capable communities and another fund will be contributed to cover the government's implementation costs. In Catalonia and for improper powers such as defense, foreign representation or investment in other regions. If it goes ahead, there will be a breakdown in the funding system that provides economic resources to the 15 commonwealth communities.

The Regional Funding System acts as a kind of common pool nurtured by various contributions. State contributions include taxes that communities share with the state (personal income tax and VAT at 50% and special taxes at 58%) and those that they fully transfer (such as inheritance, donations or property). . This money is then distributed among the autonomies following a series of criteria with the aim that all regional governments can afford the public services they provide. For that reason, removing Catalonia from the equation would create a deeper hole in resources. It will also affect the resources of the state, as it will result in a significant reduction in its finances due to residual collections that do not go to the financial system and are used to pay for other items such as justice or security.

The Foundation for Economic Studies (Fedea), led by researcher Ángel de la Fuente, tries every year to calculate the share of each autonomy in this project. The latest data, related to 2021, show only three communities – among them the Generalitat – as net contributors, that is, those who keep less money than they earn and register a negative balance. Madrid will be in first place: under this program it collects 26,000 million euros and keeps 19,700 million, making a net contribution to the system of about 6,300 million. Next, a little further away, will be Catalonia, entering the 25 billion and losing 2.2 billion to keep 22.8 billion. Farther still would be the Balearic Islands, with an unfavorable net balance of just 330 million. The other 12 general rule societies will record net gains.

Today, according to the official proposal of the Generalitat, of the total taxes generated in Catalonia (not counting local taxes), the government manages and collects only 9%, while the remaining 91% is processed by the company. On the other hand, in the proposed model, the Catalan company would manage all taxes in a model similar to the Basque Country and Navarra, where Catalonia's weight in the national economy is much higher.

Different data

The data provided by the Generalitat on regional funding do not fully correspond with the first batch of statistics published by the Treasury last week to calculate financial balances, nor with the reports produced by Fedia. The tax agency does not match the collection amounts provided in its collection reports. In its plan, the Generalitat calculates that in 2021 taxes “generated in Catalonia” will reach 52,723 million euros. Treasury data indicates that it paid 44,198 million net (53,723 million gross including own taxes) to the community in the same year.

Personal Income Tax, More or less, 23,000 million in 2021, contributing 14,226 million to VAT and 3,500 million to special taxes, according to Generalitat. All these sums will, of course, end up as part of the resources that feed the regional funding system. The tax agency provides slightly different figures—18.3 billion in personal income tax, 16.4 billion in VAT and 1,500 million in special taxes—cautioning that these data do not necessarily reflect the fiscal weight of a region. “The appointment of taxpayers by representatives is made according to their tax residence, the tax revenue of a representative group is not necessarily a good indicator of the territory's financial importance or its economic activity,” he explains.

The government, which abandoned the 2024 budget after the announcement of elections in Catalonia, has indicated through several of its members that it maintains its desire to address the reform of the financing system with all communities. Finance Ministry head María Jesus Montero said the debate on the financial system will be based on “constitutional and autonomy laws” and “the needs of Catalonia and other territories will be well defined”. Reiterating that updating the model requires political consensus, especially “an agreement with the PP”.

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