The reform of regional financing will be one of the major issues that will focus Spanish politics in 2025. Pending to be addressed for ten years, the Fiscal and Financial Policy Council (CPFF), scheduled for this month of January, will be the starting point. initial to the debate on how to fit a new distribution of resources between the different autonomies – in which there will always be lucky and aggrieved – added to the promise of a new financing system for Catalonia.
Although there are few certainties about the resulting model, from the Government A unique financing system is insisted on for Catalonia. The only thing known are the dates. In January the CPFF will include debt forgiveness, something that was also in the investiture agreement of the PSOE with ERC, when there was talk of a reduction in the deficit that the community has with the State of up to 20%.
Before even sitting down to negotiate, the autonomous communities governed by the PP already described the matter as a “patch”, “bait” and “blackmail”. In his opinion, before discussing debt forgiveness, we should talk about the complete reform of the financing system, something that different regional presidents have insisted on in recent days.
However, this pending reform will also be marked by Catalan uniqueness. The pacts between socialists and republicans dictated that the first half of 2025 should be used to define the new financing model for Catalonia. And from the Palau de la Generalitat they insist on talking about singularity. It will be in February when the talks should start.
Given the complaints raised by the Catalan quota in other autonomies, Salvador Illa, president of the Generalitat, defended in February that the agreement with ERC “is not against anyone” because, as he said, “it respects the principles of solidarity” and will be “beneficial not only for Catalonia, but for Spain as a whole”.
However, different organizations have already made their calculations of what this concert could entail, although without having defined the solidarity quota it is difficult to measure. According to Ángel de la Fuente, director of the Foundation for Applied Economics Studies (Fedea), in a report published in August, the State has two options to compensate for the loss of income tax collection: increase the personal income tax or cut the tax. spent.
VAT increase
If the State were to appeal an increase in the national income bracket “it would have to increase state tax collection by 29.5% in what remains of the common territory.” But, if instead of raising taxes, it chose to assume a drop in income and transfer it entirely to the financing of the CCAA, “this would have to be reduced by 10.7% on average.”
More options are handled by professor Desiderio Romero Jordán, in his latest article signed for Funcas. Among them is the total elimination of the two reduced VAT rates, which would give tax revenues of around 15,000 million euros, according to their calculations. This measure would have an impact on products in the food sector, especially.
Obviously, everything will depend on the final agreement and how the financing model is developed. According to Fedea, there would be a transfer of between 6.6 billion and 13.2 billion from the common treasury to the Catalan Treasury. This would increase the homogeneous financing of the Generalitat between 25% and 50%.
If this system were transferred to the rest of the autonomous communities, “the problem would worsen very considerably,” according to Fedea. In this way, if the agreement were also applied to Madrid and the Balearic Islands, the other two Autonomous Communities that are contributors to the SFA, the State would lose 37.5 billion euros in direct income.
Ten years of waiting
The debate on the reform of regional financing had to be opened in 2014, as required by law. It was the Minister of Finance, María Jesús Montero, who reopened the melon, in 2024, at the recent Fiscal Policy and Financing Council (CPFF) that was held last July.
In recent months, large business associations in Catalonia, such as Foment del Treball or the Cercle d’Economia, have urged both the central and regional Executives to address the file.
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