“The Ministry of Finance has no intention of leading any reform of the regional financing system,” says Antoni Costa (Ibiza, 47 years old), Minister of Economy, Finance and Innovation and spokesperson for the Balearic Government (PP), when asked about the meeting that the communities held with the Ministry of Finance two weeks ago in the Council of Fiscal and Financial Policy (CPFF), the body where these issues are discussed. In an interview by videoconference, he suggests that variables such as insularity or population should have more weight in the model, defends greater tax autonomy for the communities and rejects singular financing for Catalonia. “It is not acceptable that, because there is an investiture in Catalonia, bilateral negotiations are held with a community.”
Ask. How did you leave the CPFF?
Answer Quite pessimistic. We saw that the Ministry of Finance has no desire to lead any reform of the regional financing system from a multilateral perspective. We do appreciate, although the minister denied it, a certain willingness to negotiate a possible reform bilaterally with Catalonia.
P. Do you think that the Treasury has in mind a reform for all communities?
R. To the minister [María Jesús] Montero, we asked him if there was a desire to open negotiations on the reform and, if there was, what his proposal was, at least the main lines. We did not get an answer, but we are very clear that it is the Treasury that must lead the reform, because it has always been that way. And it has always been negotiated from the CPFF.
P. Montero says that the reform is also complicated because the PP communities, which are the majority, do not agree.
R. It is more of an excuse than a real reason. In all the reforms, the communities have made their proposals. In the CPFF it was made clear that we are all willing to give in. Let’s start negotiating. In 2009 there were also differences and the communities came to an understanding. I am sure that they would come to an understanding now as well.
P. And what is the Balearic Islands’ approach?
R. The insularity variable must have a greater weight in the system, as well as population growth. There is a Spain that is emptying, but there is also one that is filling up. We have 18 million tourists. This floating population uses public services, which represents an added cost for the regional coffers. And the cost of living is not the same in all communities. But these are approaches that can be subject to negotiation, they are not red lines.
On the other hand, we defend fiscal autonomy. We even believe that it is necessary to increase it, for example in traditional ceded taxes, such as inheritance and gift tax, which should be specific to each community. We will not accept in any case that minimum tax rates are imposed. We have also defended a system with partial levelling or with respect to the principle of ordinality. We are the second community with the greatest fiscal capacity, but the ninth or tenth in terms of financing.
P. Also Catalonia defends ordinality. What do you think of its proposal for singular financing?
Answer. We are not proposing to collect all the taxes generated in the Balearic Islands, but only the taxes that are assigned to us. We are not arguing that the State should have its own tax bases here. Catalonia is proposing a transfer of all taxes, in the style of the Basque quota or the Navarrese contribution. In fact, we have opposed the quota system because we understand that it cannot be generalised. In no federal country in the world do the sub-central governments, in our case the communities, collect all the taxes and the central government none.
P. Should the tax regime also be reformed? Or at least the calculation of the quota and the contribution?
R. The Basque quota and the Navarrese contribution are negotiated bilaterally with the State. This is what the Constitution provides. Would it be advisable for them to have a solidarity component more or less equivalent to that of the rest of the communities? I think it is desirable, but we are not questioning something that is in the Constitution. Now, this system has constitutional coverage, but it is not generalizable and the negotiations of the system of the rest of the communities have always been done on a multilateral basis. It is not acceptable that, because there is an investiture in Catalonia, negotiations are made bilaterally with a community.
P. The minister denied at the CPFF that there were bilateral negotiations between Catalonia and the State; she said that the talks were between PSC and ERC.
R. We have no reason to doubt the minister’s word. However, the Catalan minister says that negotiations are with the State and the PSC cannot negotiate something that affects everyone. The Generalitat and ERC know perfectly well that the PSC cannot offer what it does not have at its disposal, which is the reform of the system.
P. Are the system’s resources sufficient? Should the government put more money on the table?
R. Empirical evidence tells us that, in all the reforms, the State has put in more money. The elasticity of taxes has caused the State’s revenue to be much higher than that of the communities. The logical thing would be for there to be an injection into the system.
P. Another pending issue is the forgiveness of regional debt.
R. If it is proposed, it should be discussed in the CPFF and there should be equal distribution criteria for everyone. It affects all communities, it cannot be that the amounts are set by an agreement between the socialist party and ERC.
P. You have implemented a significant tax cut since you came to power. What results do you expect?
R. We kept our word. Our government programme clearly stated that we were going to lower taxes, specifically that we would eliminate the inheritance and gift tax. We did so on 18 July 2023. In addition, we have reduced the Property Transfer Tax (ITP). The impact of the reform, when fully implemented, will be around 200 million euros per year. However, it has not prevented us from closing 2023 with a budget surplus, which we also expect in 2024. At the same time, we have increased the 2024 budget. Therefore, we have lowered taxes and increased spending, and at the same time cleaned up the public accounts.
P. He says that communities should have more tax autonomy.
R. My opinion is that the traditional taxes that have been transferred, and the most important ones are the wealth tax, inheritance tax and donation tax, and the ITP and AJD, should be classified as their own taxes. The regulatory capacity of the communities should be full in these taxes. Progress must also be made in the IRPF. The system of advance payments has failed miserably. It would be good if the part that corresponds to the community were not paid two years later, but in the same year in which the taxpayers are paying the withholdings. Even if we have some regulatory capacity in the savings base.
P. Will they be able to approve the 2025 budget now that Has Vox broken the government pacts in the communities?
R. We had an external agreement. We have already published the order to prepare the 2025 budget and our intention is to negotiate with all parliamentary groups. We have no commitment to Vox, because it unilaterally broke the agreement. We are going to do the same thing we have done until now: govern in a minority and negotiate.
P. There have been protests against mass tourism. Is the tourist tax sufficient?
R. We have publicly stated that we are going to take strong, far-reaching measures, but we are not going to anticipate them. We have a table where there is representation from all parties, civil society, economic and social agents…
P. Is housing also included in this debate?
R. The pressure on housing prices is not only due to tourism. We have one of the highest population growth rates in Spain. There is a lot of demand and little supply, and that puts pressure on prices. We need to increase the housing supply with more guarantees and facilities for landlords, mainly small ones, so that they can put their homes on the market. We also need to build more housing. We have a decree law to change the use of premises, to build homes on higher floors… This tension will not be resolved in a year, but the foundations have been laid.
P. Don’t you see any need to put restrictions on tourist apartments?
R. The fight against illegal flats will be tireless, as will the fight against intrusion into all economic activities.
Follow all the information of Economy and Business in Facebook and Xor in our weekly newsletter
#Antoni #Costa #Basque #quota #constitutional #coverage #generalised