The new regional financing system contemplates that “the procedure for collecting and distributing revenues” may be carried out with “a common or shared cash model in which tax revenues simultaneously reach the corresponding state or regional administration.” It says nothing about the management of that collection nor that, for example, the Generalitat would collect all the IRPF in Catalonia, despite it being contemplated in Salvador Illa’s investiture pact signed by ERC.
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It is one of the aspects of the 70-page draft of the Agreement on a new financing model distributed in 14 points that was sent to the communities on Friday and to which La Vanguardia has had access. The text, which includes the formulas to calculate the new model, also makes no reference to the principle of ordinality (that no community leaves the model worse off than when it entered), despite it being another central element of Catalonia’s claims.
The draft leaves the door open for communities that wish to remain in the 2009 model and not integrate into the new one from January 1 next year. In 2009, that possibility was also contemplated and, in fact, two communities joined the new system with a one-year delay.
The text also states that adherence to three important changes brought by the new model will be voluntary. According to the draft, communities must indicate when they say yes to the new model “if they adhere to the SME VAT Fund, if they adhere to the immediate account delivery system, and their decision on the option for financing non-homogeneous competences.” Therefore, asymmetry in the financing system will be given by whether or not they accept to participate in the new mechanisms created.
The calculation of the adjusted population does not include Catalonia’s historical claims such as the cost of living
Having been a negotiated agreement from Catalonia, the Catalan autonomous community clearly benefits in these aspects, so its adherence is considered certain. For the rest of the communities, it is not clear. It is now when the other 14 autonomous governments dissect the draft to see if the different options benefit them or not.
Although the articles do not speak of fiscal dumping by communities like Madrid, where the tax pressure is the lowest in the State thanks to the capital effect, mechanisms are introduced that particularly harm them because of that tax policy. To carry out the distribution of funds among the communities, the actual tax revenues of the communities are not taken into account but the potential ones. In the new model, several taxes such as the wealth tax, which were not included before, are incorporated. It is a measure that favors Catalonia and harms Madrid because, despite being where the lowest tax is paid, it will be considered as if a higher rate were paid.
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But not everything is beneficial for Catalonia. The draft also shows that some historical claims from the Catalan political and academic world have not been addressed, such as those referring to the adjusted population. To carry out the calculations for the distribution of funds, the model does not take into account the population as it appears in the register but another “adjusted” by a series of parameters such as the student population, insularity, or dispersion. Catalonia has always claimed that the register should have more weight in the weighting, but in the adjusted population, it remains at 30%. It was also claimed that the cost of living be taken into account. It does not appear in the draft. The main modifications are greater precision in the definition of age groups.
The text sent to the communities essentially reflects what was agreed by the Treasury, ERC, and the Generalitat. Sources consulted explain that a proposal that was not maximalist was sought with the aim that it could pass the first parliamentary procedure and not be rejected with a total amendment by groups such as Podemos or Compromís.
On July 29, the text will be approved in the Fiscal and Financial Policy Council (CPFF) with the votes of the Spanish Government and Catalonia. Negotiators are working so that the Canary Islands could join and vote in favor or, at least, abstain. The rest of the communities – including the socialists – are assumed to vote against.
From there, it will be taken to Congress to pass the first vote and allow amendments to be incorporated. That would be the moment when Junts could negotiate some change, with which to justify their vote in favor. Treasury sources explained yesterday that Minister Arcadi España is open to assuming changes. The countdown started on Friday.
Catalonia, Madrid, Balearic Islands, Aragon, Valencia, and La Rioja benefit from the SME VAT
The new financing model project foresees that “communities may receive a positive or negative advance payment from the SME VAT Fund corresponding to them in each fiscal year.” Therefore, only those that benefit from it will join the mechanism. With the latest available data, only 6 of the 15 communities under the common regime would obtain more income. The total amount is about 2 billion euros per year. Of these extra resources, Catalonia would take more than half: 1.35 billion. Madrid would be the second community to earn the most with the new mechanism: 435 million. The third is the Balearic Islands with 150 million. Aragon would receive 70 million, the Valencian Community 50, and La Rioja 20. Adherence to this mechanism is for five-year periods, so communities need to be very sure of the forecasts to avoid losses. On the other hand, the last point of the draft clarifies that the new model does not affect the development of their own budgets. The text states that “the necessary regulatory developments will be made so that the additional expenditure that the communities finance with the permanent resources derived from this agreement does not count for the purposes of the spending rule.” What the text does not include is the final gain for each community. That information was sent separately.
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