El líder del PSC, Salvador Illa (i), y el presidente del Parlamento catalán, Josep Rull (d). – David Zorrakino – Europa Press
Extending the measure to the rest of the common regime communities under the same conditions would cost between 31,000 and 62,000 million additional euros.
The Foundation for Applied Economics Studies (Fedea) made a first estimate on Wednesday of what the Catalan economic agreement negotiated between the PSC and ERC could entail, estimating an annual transfer of between 6,600 and 13,200 million euros from the common treasury of the State to the Catalan Treasury.
This was announced by Fedea in a report in which, pending finalizing the details of the pre-agreement, the Generalitat would increase homogeneous financing between 25% and 50%.
«Since Catalonia starts from a homogeneous per capita financing index of 101 in 2022 (compared to an average of 100 for all common regime communities), the measure would clearly place it above any other non-foral community,» the report adds.
Thus, the Foundation warns that the money intended to improve the financing of Catalonia (and other communities, if applicable) «will have to come from somewhere» and, if no community can lose funding, Fedea warns that the State will have to adjust its spending downwards by reducing benefits under its jurisdiction, such as pensions or defense, or increase (now or in the future) the tax burden on the increasingly smaller part of the population that continues to be subject to its taxes.
In this sense, if the State resorted to an increase in personal income tax to compensate for the loss of resources without affecting regional financing or reducing its expenses, it would have to increase the revenue from the state portion of the tax by 29.5% compared to the distance that would be left from the common territory after Catalonia’s exit. If, on the other hand, they chose to accept the decrease in income and transfer it entirely to the financing of the rest of the Autonomous Communities, it would have to reduce it by an average of 10.7%.
Fedea’s executive director and author of the report, Ángel de la Fuente, recalls that a recurring nationalist demand is the elimination of the fiscal deficit of the community with the State, or rather the estimation of this magnitude that the Generalitat calculates each year through the cash flow procedure.
According to the latest estimate by the Government, the difference between what the community contributes and what it receives from the central government would be around 22,000 million euros, almost 10% of GDP, an estimate that «is heavily biased upwards.»
According to Fedea, for the last year in which comparison is possible (2014), the maximum deficit estimated by the Generalitat was 65% higher than that calculated by the Ministry of Finance using a cost-benefit approach, which is the closest thing to an accepted international methodological standard in this literature.
«PROVIDING A SIGNIFICANT SUBSIDY TO A WEALTHY COMMUNITY»
If this bias had been maintained, eliminating the maximum deficit would have actually left the region with a surplus of around 8,700 million euros using the cost-benefit criterion. «This means granting a not insignificant subsidy to a wealthy community,» clarified Fedea.
Although it is a «highly debatable» calculation, according to Fedea, the maximum estimate of the fiscal deficit drawn up by the Generalitat has become the dominant reference in the public debate in Catalonia and, as such, will directly condition the actions of the parties negotiating the parameters of the new system.
Nevertheless, it is expected that the agreement will be reached with the aim of reducing Catalonia’s contribution to the common fund by between 30% and 60% of the nationalist maximum target of 22,000 million euros annually, that is, with a net transfer of resources to Catalonia between 6,600 and 13,200 million euros annually.
UP TO 62,000 MILLION IF EXTENDED TO ALL REGIONS It is evident, according to Fedea, that the problems would worsen considerably if the new system were extended to Madrid and the Balearic Islands, the other two regions that contribute net to the Autonomic Financing System (SFA). The State would lose another 37,500 million euros in tax revenue and if the corresponding quotas were negotiated with similar criteria to those that the Catalan nationalists want to impose, the net income of the State would plummet. Nevertheless, Fedea calculates that extending the measure to the rest of the common regime communities under the same conditions would cost between 31,000 and 62,000 million more euros.
