taxation

Christoph Leitl believes a system similar to that of the Basque country could help solve the deadlock

Spain’s effort to reduce its public deficit “has been insufficient”, according to Brussels. Thus, the European Commission (EC) took this Thursday the first step in order to fine Spain, ahead of the Ecofin meeting. The fining process foresees that 20 days after this meeting, the EC could present the suggested fine, which could equal 0.2% of Spain’s GDP. According to a report released this Thursday by the EC, Spain closed 2015 with a 5.1% deficit target, far from the 4.2% established by Brussels. The report concludes that Spain’s fiscal effort fell “significantly short” of what was recommended and even “relaxed in 2015”. “Spain did not reach the intermediate target for the headline deficit in 2015 and is not forecast to put an end to its excessive deficit by 2016”. 

The President of the Catalan Government, Artur Mas, presented on Monday the model for Catalonia's own Treasury, which will be developed should "the political conditions" be there, he stated. "This is the most serious attempt to build our own Treasury in the last 300 years", stressed Mas. "After two years of work, we are ready" to launch and Catalans should not waste "this great opportunity", he stressed. "Without our own Treasury, there is no real self-government", the Catalan President stated. The system would include Catalonia's own Tax Agency and  is inspired by the taxation authorities in countries such as Sweden, Denmark and Australia, which prioritise cooperation with taxpayers over controlling them. In these models, efforts are concentrated on severely persecuting tax evaders and underground economy, while the vast majority of tax-payers who deal correctly with their fiscal obligations receive assistance and have unlimited access to their fiscal data.

The International Monetary Fund (IMF) has reviewed and improved its economic growth forecasts for Spain, going from a 2.5% growth rate for 2015 forecast in April to a 3.1% one foreseen this June, and from 2% to 2.5% for 2016. However, the IMF has also issued recommendations and warnings, emphasising that Spain will have to carry out "additional fiscal efforts" and "structural reforms" in order not to jeopardise the country’s economic recovery. The IMF recommends that Spain reduce the costs of public healthcare and education by making users pay for part of the services. According to the international organisation, Autonomous Community governments – such as Catalonia's – should have greater fiscal responsibilities in such systems since they exclusively manage them. In this vein, the IMF has praised the fiscal consolidation efforts undertaken over the past few years by regional governments and has asked for an increase in their funding and fiscal powers, as well as for the adapting of the deficit targets to their needs.

The judge at Madrid’s 'Audiencia Nacional', which is a court investigating and ruling on organised crime, terrorism and international fiscal offenses, announced on Wednesday the launching of an ‘oral trial’ against FC Barcelona itself, its current President, Josep Maria Bartomeu, and his predecessor and friend, Sandro Rosell, over Neymar Jr's signing. In the end, neither Rosell's resignation in January 2014, nor the payment of a complementary tax declarations have prevented a judge from requesting the opening of a trial against the Catalan club and its former and current presidents. However, it is not clear whether the trial will take place in the end, since there are some doubts about the court jurisdiction. The Audiencia National judge is accusing all of themof alleged corporate and tax offenses in the Brazilian player’s signing. The judge believes that the total amount of the transfer was €83.3 million and not the €57.1 million stated by Rosell in 2013. In addition, the judge believe Rosell hid the real figure from the club's balance sheets.

The fee that was temporarily charged on each drug prescription in Catalonia between June 2012 and January 2013 has started to be refunded by the Catalan Government, after the Constitutional Court definitively banned it in May 2014. The decision came after an appeal from the Spanish Government, despite the People Party (PP) initially having supported the measure in spring 2012. However, after the Catalan Government started to back independence from Spain in autumn 2012, the PP decided to oppose the drug prescription fee. The measure had been adopted to reduce pharmaceutical spending, with the final goal being to reduce public deficit. In the short period the fee was in place, €45.7 million was directly earned but much more was saved, since drug spending dropped by around 23%. According to the Catalan Government's calculations, so far 100,000 euros has already been returned to approximately 5,000 people and about €6 million will be returned in total. So far, 300,000 people have filed the request, with an average of €20 per person.

The Constitutional Court has accepted to debate the Spanish Government's last appeal against the Catalan Executive's tax on bank deposits, which has to be paid by financial entities. Such a decision represents the automatic cancellation of the tax for an initial period of 5 months. Catalonia approved such a measure in December 2012 and two weeks later, the Spanish Government approved its own tax with a 0% rate, so it was 'de facto' cancelling the regional taxes. However, instead of compensating Catalonia for having cancelled the tax – as it is legally obliged to do – the Spanish Government refused to do so, since it argued that the tax had not entered into force yet and took the issue to the Constitutional Court. The Court initially accepted the Spanish Executive's appeal and the tax was temporarily suspended, but in May 2013 it was lifted. In July 2014, the Spanish Government modified the tax with a 0.03% rate and in December it presented a new appeal against the Catalan tax, which brought in some €680 million in 2014.

The European Commission has warned Spain that 6 Autonomous Communities, including Catalonia, should cancel their tax on large-sized shopping centres because it may represent indirect State aid benefiting smaller shops and therefore damaging free competition. The Catalan Minister for Business and Employment, Felip Puig, announced legal actions to defend this tax, which was validated by the Constitutional Court. Catalonia’s shopping model has a great presence of small and local shops, mostly run by families with a small number of employees. In order to protect this model and make it compatible with new shopping malls and large-sized international shops, in 2000 the Catalan Parliament created a tax on shops larger than 2,500 square metres. Currently, it is set at €17 per year per square metre. The revenue collected is devoted to actions promoting local retail.

The Catalan Government presented on Tuesday its budget proposal for 2015, which has a €22.48 billion spending but only a €19.98 billion revenue. The Catalan Finance Minister, Andreu Mas-Colell, insisted that spending cannot be further reduced since no further budget cuts can be implemented without seriously damaging public services. In fact, the current budget keeps social spending levels of 2014, which represent 71.2% of the new budget. In addition, public employees' full salary will be restored, after it had been lowered for the last 3 years. The 2015 budget posts a 0.7% deficit (€1.44 billion). However, there is a €2.5 billion difference between spending and revenue that should mostly be covered with €2.19 billion from Spanish Government's pending debts. However, Mas-Colell does not rule out being granted a higher deficit target, since the current one is "unfair" and is not in line with the Catalan Government's austerity measures already adopted. Furthermore, the Spanish Government has reduced funds from the regular funding scheme by 10.7% between 2013 and 2015, a €2 billion reduction, despite the economy is recovering. 

On Wednesday the Catalan Parliament passed two important bills. With 74% support, it has approved the Law of External Action and Relations with the EU. Only two parties voted against it, the Spanish nationalist People’s Party (PP) – which runs the Spanish Government – and Ciutadans (C’s). A third party, the alternative left and radical independence party CUP, abstained because it considered that the law was not “ambitious enough”. All the rest supported the bill, which mainly puts in order the existing bodies and mechanisms, although it also creates some new ones, in line with the Catalan Government’s powers in this area, recognized by the Catalan Statute of Autonomy. The other bill is the tax on Internet suppliers, which aims to fund the Catalan audiovisual sector, affected by Internet piracy. No party voted against it. The new tax aims to collect some €20.5 million per year and it is welcomed by the cinema industry, and rejected by the main Internet suppliers.

40 municipalities in Barcelona's Metropolitan Area, are to half the price of public transport during incidents of high air pollution. This is part of a Catalan Government plan for the improvement of air quality with the goal to fight climate change, affecting 4.3 million people. The main objective of the plan is to reduce emissions of nitrogen oxides (NOx) and of particle matter less than 10 microns in diameter (PM10). The plan also includes the promotion of rail travel and increasing highway tolls and the fares of municipal parking within these areas by 25% on polluted days. In addition, there will be tax breaks for those industries achieving lower emissions. The measures are aimed at the mobility of people and goods, industrial activity, and citizens’ habits.

On Tuesday, the Spanish Finance Minister, Cristóbal Montoro, rejected to review the funding scheme of the Autonomous Communities to grant them more resources, despite the fact that the Catalan Government is under-budgeted. On Wednesday, the Spanish Finance Ministry downplayed Catalonia's fiscal deficit by issuing the so-called fiscal balances, which calculate the inter-territorial fiscal transfers, posting a significantly low Catalan contribution. According to the Spanish Government's new calculations, Catalonia gave away €8.46 billion in 2011, representing 4.35% of its GDP. The figure is significantly lower than the Catalan Government's calculations: €15.01 billion and €11.09 billion, using two complementary methodologies used by the Spanish Executive in 2008 and agreed among independent university experts.

The Catalan Government approved on Tuesday a measure to impose a tax on empty flats owned by financial institutions. The aim of the tax is to incentivise banks to rent out the empty homes. Santi Vila, the Catalan Minister for Planning and Sustainability, said that the "mere announcement" of the tax has already caused Sareb [Spain's public 'bad bank'], Catalunya Caixa and Bankia to yield to the Government 1,230 apartments for social rent. During the press conference after the weekly Cabinet meeting, Vila pointed out that the new tax will not apply to individuals and will only be intended for flats that have been taken out of the market for more than two years. The Minister also said that the measure is not simply about "tax collection" but is instead to ease the access to housing market in the midst of a housing crisis.