Differentiated financing of Catalonia
One of the reasons for the investiture of Salvador Illa as president of the Generalitat has been the PSC-ERC pact. It is not a sovereign pact at all, but in some respects new doors could be opened, unless the political strategy of the PSC-PSOE, which is common, is re-imposed. One of them is the transformation of the State financing model itself. The Pact says that Catalonia will receive differentiated funding, which could mean a reform of the current model of autonomous state financing. But what is agreed is open and ambiguous.
The agreement talks about an increase in the rule of law for all the taxes that are created in Catalonia, in a very broad and unclear manner. And then there is the need for differentiated funding. The pact emphasises the complementarity between support for state expenditure and inter-territorial solidarity. It is crucial that the negotiating process be placed in the bilateral framework between the Generalitat and the central government, that is, outside the multilateral arena.
It has been mentioned that Catalonia will have with the new tax system a model similar to that of the concert and the economic pact of Hego Euskal Herria. But, despite the doubts, the Generalitat’s regulation will not have either the reach or the power of the Basque tax systems. The Basque foreign rules are completely outside the scope of state funding and the Catalan rule appears to remain within the common system.
In the common system communities, the central administration collects most of the taxes and distributes them between communities to finance skills and investments, in accordance with a principle of solidarity between the richest and the poorest. This scheme was agreed in 2009 and is now expired.
The economic weight of Catalonia, which is three times that of Hegoalde, would have a very strong effect on the financing of the State being left out of the common fund.
The four haciendas of the South are outside the mechanism of inter-territorial solidarity. Because it pays the quota to the State for the benefits of its services and does not channel donations to other territories. Catalonia, for its part, would remain in this mechanism, keeping intact the only State tax fund that exists in the State. The economic weight of Catalonia, which is three times that of Hegoalde, would have a very strong effect on the financing of the State being left out of the common fund.
Among the investiture agreements would be the full collection and management of IRPF by the Generalitat (currently 30%, thanks to the Majestic Pact signed in 1996 by Aznar and Pujol). The collection of the wealth, succession and game of Catalonia would remain in the hands of 100% of the funds. And the cancellation of the historical fiscal debt of Catalonia with the State is also agreed.
But the question is how and how much Catalonia will contribute to the common fund. This decision will condition the way in which the cash flows of the common system will be channelled in the future and, ultimately, the structure of the new financing model of the common system. This will be the main area of conflict to advance the differentiated financing formula. We are already seeing the malicious use of the concepts of insolidarity and privilege by the centralist voices of the right and left.
Most administrations and social partners in Catalonia have repeatedly claimed that the problem of under-financing is the problem. It remains to be seen whether the differentiated tax system is the appropriate instrument for deepening the path to sovereignty. In the tension between federalization or the recentralization of the State, the reform of the financial model is one more step. The first challenge of the new political course will be this forceful issue.
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