In recent days, the debate on regional taxes has been opened in Spain, unleashed by the approval of the bonus (not abolition) of 100% of the wealth tax in the autonomous community of Andalusia.
Those of us devoted to the study and research of tax matters can attest that “from that dust comes this sludge.” Populist proclamations are thrown up in the media and networks with no technical justification for lowering or raising taxes with a clear and distinct electoral purpose.
A flag has been taken to cling to, turning taxation into an electoral showdown between political parties and even within them. There is a reduction in taxes, an increase in the wealthy, a selective reduction, thresholds of 20,000 euros, of 40,000 euros, of struggle between autonomous communities. The controversy is served. But yes, the mention of government spending is not seen or expected.
Continuing with the wise Spanish proverb, it can be said as a button shows. The situation seems chaotic and meaningless and perhaps it is no more than a manifestation of the system itself, which one and the other have created, in which taxation is not in itself a medium or short term goal, but rather an electoral tool not the necessary rest and rest studied and planned.
Let’s try to start at the beginning. The Spanish Constitution recognizes the principle of financial autonomy of the Autonomous Communities and regulates the possibility for them to levy and recover taxes within constitutional limits.
The Organic Law on the Financing of the Autonomous Communities (LOFCA) develops this power and strikes a balance between the taxing powers of the State, the Communities and the local entities (although in this text we only consider the relations between the State and the Communities will treat).
The aforementioned LOFCA stipulates that the autonomous communities can levy taxes, as long as they do not fall on taxable events that are already taxed by the State.
If one takes into account the wide variety of taxes that existed at the time of adoption (1980), it turns out that in order to create new tax figures, the autonomy had to look for manifestations of economic capacity that had not yet been taxed . In this quest, new taxes are created, in fact environmental taxes, which create a map of own taxes that is not very coherent between territories (as if the environment understood physical boundaries) and also generates little collection.
Given this situation, in the late 1990s, they started claiming a share in collecting state taxes (which they do collect) to increase their income. It starts with a collection of 35%, progresses to 50% (and up to 100%) in some taxes, including, in addition, the transfer of regulatory powers.
Thus we find the transfer of all taxes, including part of their regulations, of wealth tax, inheritance and gift tax, wealth transfer and documented legal acts, registration and gambling, and electricity (without regulatory authority), or 50% of personal income tax, to name the most important.
The collection of these taxes represents almost 90% of the income they receive for the autonomous communities.
By transferring this collection, the Autonomous Communities, as defined by Law 22/2009, can decide through regulatory instruments (own regulations on discounts, rates, bonuses, deductions…) whether they want to increase or decrease the tax burden, in order to the point that they are allowed to set discounts of 100% which imply a de facto practical abolition of the tax.
In this legal framework, the fiscal design of autonomy comes into play, much more active in pre-election times. In recent times, communities have been accused of fiscal dumping, a race to the bottom and “fiscal competition between territories.” The problem, in the case of being one, is not the autonomous communities, but the norm that allows this behavior.
The autonomous communities have to organize their budgets and there the principle of fiscal co-responsibility is essential, whereby marginal increases in expenditure in an autonomous community must be financed by marginal increases in taxes in that community and vice versa. That is, what is in charge of the entire domestic economy, which balances income and expenditure.
However, we hardly hear about these increases, other than proclamations in favor of education or health, without some clear technical content worth mentioning. We certainly believe that fiscal policy decisions should be based on spending decisions and not the other way around, or at least related. It seems common sense.
The Constitution provides the tools and the autonomous communities use them in one way or another. Now a system has been created, protected by regulations, in which a citizen of Valencia, Cantabria, Andalusia or Madrid will pay differently depending on where they live.
Was this the purpose of the Spanish Constitution in establishing the Autonomous System? This should be evaluated. There are voices in favor of minimum harmonisation, but Spain has an approved constitutional framework in which autonomy has a place and recognition.
The solution is not to create a new tax amount to counter the policies of an autonomous community that does not satisfy the State, with serious doubts about its legality and effectiveness. Rather, it is to stop, debate, agree and decide where to go. I am very concerned that this proposal is a chimera in the run-up to the elections.
Article published in ‘The conversation’.
Source: La Verdad
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
