The Minister of Finance, María Jesús Montero, with her predecessor, Cristóbal Montoro.
The coalition government has committed to ERC to harmonize regional taxes so that Madrid pays more in exchange for the support of the independentistas to the Budgets.
In reality, the Minister of Finance, María Jesús Montero, had already planned to harmonize regional taxes for some time.
It is not something improvised: already in 2017, the experts for the reform of the autonomic financing gathered by Cristóbal Montoro (PP) proposed a review of the wealth tax, inheritance and donations, and patrimonial transfers to set minimum rates that avoid distortions in the effectiveness and tax efficiency.
The tax reform that Montero is preparing will include a harmonization of regional taxes: inheritance, donations, property transfer tax and property tax.
The minister claims that the communities cannot lower them beyond a minimum, or raise them above a ceiling.
This scheme will force the Community of Madrid, among others, to raise most of its taxes.
Although ERC announced on Tuesday that this is one of the agreements in exchange for its support for the 2021 Budgets, the truth is that the Treasury has been with this plan for some time, which it plans to approve next year.
Despite the striking of the agreement, Montero did not promise anything new or revolutionary to Gabriel Rufián (another thing is the political staging).
It is something that has been accepted by academics for years.
The committee of experts for the reform of autonomous financing created by Cristóbal Montoro, former Minister of Finance (PP), in 2016 defends the harmonization of regional taxes.
A score of academics and specialists spent a year studying and debating all the details of the regional accounts.
In their final report with the proposals to reform the financing system, they stated: “It would be desirable to harmonize the taxable and payable bases of the taxes assigned in whole or in part, restricting the autonomous regulatory capacity to the tax scales and possible deductions or bonuses from the quota , as well as studying the possibility of introducing maximum and / or minimum effective tax limits on certain property taxes ”.
A year of work: the report of the wise for autonomous financing
The wise men were not strangers to tax competition between communities: “It is worrying that the competition to attract the most mobile tax bases may lead to lower than desirable rates on certain property taxes or even to the disappearance of figures that they fulfill a necessary redistributive function, such as the inheritance and gift tax ”.
And they warned: "An additional problem in relation to the taxes totally transferred has been the lack of attention on the part of the State to the updating of its regulations, which in some cases dates back more than thirty years."
And they recalled that the inheritance tax legislation dates back more than 30 years, since it dates from 1987.
After a careful examination of the situation, the experts concluded: “The harmonization of the tax bases of the transferred taxes does not limit their collection potential and therefore does not restrict the autonomy of income of the Autonomous Communities, while on the other hand it reduces costs of management and compliance and possible barriers to mobility, increases the transparency of the tax system by facilitating comparisons between the different territories and the measurement of the tax capacity of the autonomous communities ”.
After presenting the report, in July 2017, Cristóbal Montoro also defended that regional taxation had to be harmonized to reduce differences between territories, although his plans did not include toughening the wealth tax.
Harmonization in 2021
The Minister of Finance explained in a recent interview with EL PAÍS that the reform of regional financing and the consequent fiscal harmonization "has not been done now due to the fact that the Budget law does not allow the change of an organic law."
But he insisted that he wants to launch it in 2021. The Treasury wants to link the reform of regional taxes to that of the financing system, which has been bogged down since 2014. The ministry has in a drawer all the technical work to address this issue, but the Political difficulty in opening this melon, one of the thorniest on the Spanish political scene, has delayed the reform.
The minister assures that she wants to launch it next year.
The dust cloud over Madrid's tax competition arises with some frequency.
Above all, when a political official accuses the community governed by the PP of
(downward tax competition).
And this happened again this Tuesday.
ERC's spokesperson in Congress, Gabriel Rufián, announced that he had reached an agreement with the Government to support the General State Budgets for 2021. The price charged for his vote includes the creation of a bilateral committee to study a "total, fair and progressive tax reform".
Rufián specified that he wants the wealth tax to be more progressive for large fortunes and "end
de facto tax
and the tax haven set up by the right in the Community of Madrid."
The independence leader has long claimed the same wealth tax for all of Spain, to avoid differences between territories.
That is precisely what the ERC spokesperson did in Congress last Tuesday.
His speech is similar to the one wielded by other communities governed by the PSOE, with Valencia at the head, which accuse Madrid of unfair competition because it has lower taxes than the rest.
These autonomies affirm that Madrid can afford this low taxation because it concentrates more wealth.
A situation that they believe is unfair.
A glance at the community tax map reveals that behind these there is a certain ideology.
The autonomies where the socialist party has ruled for the longest usually have the highest taxes, because left-wing governments consider a priority to strengthen the welfare state.
On the contrary, the autonomies where the popular ones have governed the longest usually have the lowest taxes.
In the PP they believe that low taxation helps stimulate the economy and growth.
That is why Madrid makes the flag of having the lowest taxes.
But the debate is whether this community benefits in addition to hosting the headquarters of large companies and being the heart of the state public administration, which gives it more wealth and, above all, more room to lower taxes.
Something that other autonomies cannot do.
Experts in regional finance such as Ángel de la Fuente, director of Fedea, defend that Madrid does not benefit from the capital effect.
Remember that the current financing system has mechanisms to correct these possible income imbalances between territories.
Francisco Pérez, director of the IVIE, defends the opposite.
"There is undoubtedly a capital effect."
And he uses a study published a couple of months ago that reveals that Madrid has benefited from being the seat of the State Administration, which has allowed it to attract the headquarters of large companies and accumulate more qualified taxpayers and higher incomes.
In this context, he explains, the capital has been able to develop a fiscal policy.
"I have also been a regional councilor and I understand that feeling," explained the Minister of Finance, María Jesús Montero, in a recent interview with this newspaper.
Better-financed communities may have more ability to lower taxes than less-financed communities.
It is a question that of course must be corrected, because fiscal capacity cannot be exercised if the model gives you a different capacity than the one it contributes to the neighboring community, "the minister added, explaining:" That situation it also occurs because those territories with less income for historical reasons, because they have fewer tax offices of companies, or for many other reasons, are forced to raise the rate more to collect the same as those that have more income ”.
In reality, the financing system does not work like that.
The experts for the reform of regional financing explained in their report that “those communities that decide to increase the tax burden on their citizens or improve their efficiency in the management of the taxes they collect directly will keep all the additional income obtained in this way. , while those that lower their tax rates or inefficiently manage their taxes will bear the full costs of their actions, without the financing system compensating in any way for the corresponding loss of income ”.
Madrid stops earning almost 5,000 million a year
The point is that the tax laws allow Madrid to reduce to a minimum the taxes over which it has jurisdiction.
It is the autonomy where you pay less personal income tax, inheritance and gift tax and practically nothing for the wealth tax.
In fact, Madrid has a 100% discount on wealth tax, which in practice consists of exempting it.
This decision alone costs the Community of Madrid close to 1,000 million each year.
Can this be considered
"Probably the term technically is not entirely correct," recognized Montero, who described his position: "It is good, and it is also innate that the autonomies can exercise their fiscal autonomy and develop their fiscal system, but without injustices occurring.
There cannot be situations in which the citizens of a territory, because they have less income than those of the neighboring territory, are forced to raise the rate much more, with what this entails a greater contribution from those who have less. ”.
The truth is that Madrid calculates that in the last 15 years tax cuts have allowed Madrid residents to save 48,292 million euros.
The other side of the same coin reflects another story: Madrid has stopped entering that amount since 2004. Only last year, Madrid stopped collecting 4,571 million euros from its tax gifts, according to calculations by the administration chaired by Isabel Díaz-Ayuso .