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Montero Has Agreed With ERC Due to Tax Reform For Madrid

The Minister of Finance, María Jesús Montero , prepares a tax reform that will include a harmonization of regional taxes: inheritance, donations, property transfer tax and property tax.

That is to say, that the communities cannot lower them beyond a minimum, nor raise them above a certain limit.

This scheme will force the Community of Madrid to raise most of its tax charges. Although ERC announced on Tuesday that this is one of the agreementsthat has negotiated with the Government in exchange for its support for the 2021 Budgets, the truth is that the Treasury has been with this plan on the table for some time.

In fact, the former Minister of Finance, Cristóbal Montoro, also valued homogenizing regional taxation to reduce differences between territories, although his plans did not include toughening the wealth tax.

“It has not been done now because of the fact that the Budget law does not allow the change of an organic law,” explained Montero in a recent interview in EL PAÍS .

The Treasury wants to link the reform of autonomous taxes to that of the financing system of the autonomous communities, 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 to open 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. Basically, when a political official accuses the community governed by the PP of fiscal dumping (unfair 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 intends that the wealth tax be more progressive for large fortunes and “end dumpingde facto fiscal and with 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. ERC’s speech is similar to that used by other communities governed by the PSOE, with Valencia at the head, which accuse Madrid of practicing fiscal dumping 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.

The truth is that a glance at the community tax map reveals that there is a certain ideology behind them.

The autonomies where the socialist party has ruled for the longest time tend to have the highest taxes, because left-wing governments consider strengthening the welfare state a priority. 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 finances such as Ángel de la Fuente, director of Fedea, defend that Madrid does not benefit from the headquarters effect. Remember that the current financing system has mechanisms to correct these possible income imbalances between territories.

“I have also been a regional councilor and therefore 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 ”.

Montero defended that the tax system has to be progressive and equitable between territories. “I have always been of the opinion that taxes are paid by citizens, not territories, and a fair tax system is a tax system that makes citizens with more capacity have more contributions and citizens with less capacity have less”.

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 less personal income tax, inheritance tax and donations are paid and practically nothing for the wealth tax. In fact, Madrid has a 100% reduction in 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 as dumpingfiscal? “Probably the term technically is not entirely correct,” acknowledged 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 for its tax gifts, according to calculations of the administration chaired by Isabel Díaz-Ayuso .

The minister anticipated some of the measures that she proposes to correct this situation: “We believe that it is necessary to promote fiscal harmonization for fiscal figures that, if not harmonized, will be delegitimized due to the effect they produce, especially the headquarters effect, which is the more damaging in terms of fiscal injustice, so that we are able to do what we are asking for in Europe ”.

And he added: “This is not different from what I ask in Europe. I ask in Europe that it cannot be that there are certain territories that are tax havens, for example, because that causes relocations of the industry and alters the European internal market.

I ask in Europe what I think Spain also has to develop, which is a certain harmony, which does not exhaust the regulatory capacity of the autonomous communities,fiscal dumping that makes certain territories benefit over others ”.

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