The unattainable process of the Catalan employers' affiliation to calculate the fiscal deficit | Economy | EUROtoday

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The first vice president and Minister of Finance, María Jesús Montero, in a speech in the Senate, on April 23.
The first vice chairman and Minister of Finance, María Jesús Montero, in a speech within the Senate, on April 23.Rodrigo Jimenez (EFE)

The decibels surrounding the calls for of the Catalan nationalists concerning financing have decreased in depth, however the matter is much from being thought-about settled. Pending is the forgiveness of a part of the regional debt, a request from ERC to assist the investiture of Pedro Sánchez, and easy methods to handle the distinctive therapy that Junts has requested. Both attraction to the alleged fiscal mistreatment of Catalonia to assist their claims and therefore the return to the talk on fiscal balances and the requirement for knowledge to calculate them. For now, the Ministry of Finance has revealed the primary batch of information for this, data that had not been disseminated for years as a result of monumental political mess it generates and that in response to Carles Puigdemont, nevertheless, is important to “address the debate on sovereignty prosecutor of Catalonia.” In this context, the Catalan employers' association, Foment del Treball, has decided to recruit a group of external experts to advise it on the matter, although the possibility of reaching a consensus is very low due to the different positions of its members. “I'm afraid it's very complicated,” admits one of them.

The matter is not trivial, because there is no single way to calculate the balance of the fiscal balances – that is, the difference between the benefits that the citizens of a territory obtain from the actions of the central Administration and their fiscal contribution to it – and their results have been used as a throwing weapon in the political debate. The Generalitat estimates that it has a fiscal deficit of more than 20,000 million, a figure that other experts reduce by half and place below Madrid's contribution. “It is normal that the richest territories contribute more. Logically, they pay more taxes, but that does not give them the right to better services, the same thing that happens at the individual level,” says Ángel de la Fuente, executive director of the Fedea analysis center and one of the experts summoned by the Catalan employers' association. “The drawback just isn’t the deficits of Catalonia or Madrid or the surpluses of Andalusia or Extremadura, however reasonably that poor communities like Valencia have a deficit whereas different wealthy ones just like the Basque Country have a surplus.”

The commission on fiscal balances appointed by Foment is not the first created by the employers' association, which also enabled another to unblock a possible solution for the expansion of the El Prat airport. In this case it is a nuclear issue for the Generalitat, which every year tries to update its calculation with a model that two of the members of the commission, Maite Vilalta and Guillem López Casasnovas, who have participated in its design, know well. According to this, with data from 2020, Catalonia suffered a fiscal deficit of 21,982 million, equivalent to 9.6% of its GDP. Successive regional governments have used this calculation as proof of the underfinancing suffered by the autonomous community with respect to the resources it contributes to the system, but also as an argument against the low investment of the State Administration in Catalonia.

Foment del Treball seeks a formula that allows approximating positions between the architects of the two different calculations, whose greatest differences represent, perhaps, López Casasnovas and De la Fuente. “If there is no will for political consensus, nothing is possible, but if there is will, we want to provide that minimum academic consensus on the model to be taken into account,” explains Jordi Alberich, the president of the commission created by the Catalan employers' association. The Barcelona Chamber of Commerce is trying to make another approach to the topic through its advisory council, a sign of the interest that such an apparently theoretical topic arouses among politicians, businessmen and academics in Catalonia. In fact, a 2022 law obliges the Catalan Government to calculate fiscal balances with the latest available data before approving its Budgets each year.

The work undertaken by the business organization will hardly come together in a document that can be signed by the five specialists appointed to the commission who will advise another internal Foment committee that is analyzing the matter. In addition to López Casasnovas, De la Fuente and Vilalta, Santiago Lago Peñas, professor at the University of Vigo, and Francisco Pérez, director of the Valencian Institute of Economic Research (IVIE), are also part of the external group. At the moment, there has only been one meeting in Barcelona and it was decided to set another meeting, this time in Madrid, after the regional elections in Catalonia that have just been held.

Foment does not aspire for its document to be signed by all the experts either, but it does hope that it will serve to defend an option for its organization and try to join other entities to put pressure in a context in which a reform of the autonomous financing system, pending, is urgently needed. for a decade now. “We worked to find a stable and consistent model and move away from simplistic and self-interested readings,” says Alberich. In short, they do not want to make the calculations, but rather form an informed opinion and set the criteria to be able to do them.

Incomplete data

In the absence of work starting, it seems that there is a general consensus: the General Intervention of the State Administration (IGAE), dependent on the Ministry of Finance controlled by María José Montero, has not provided all the necessary data to make the calculations , whatever the method used. In fact, the information provided by the Treasury is still incomplete and insufficient to calculate the balance of the scales, but the ministry explains that there is still no established date to publish the rest of the missing data.

Is the understanding attempted by Foment possible? “Right now I would say no, the positions in the first meeting were very far apart,” says López Casasnovas, who defends that the model used by the Generalitat is the one with the most tradition in Catalonia — “here there is tradition since the Second Republic,” defends—and the most appropriate, although there is a lack of data to refine it. The model used by the technicians of the Catalan Department of Economy and Finance focuses on the direct impact generated by the activity of a specific public sector in a territory: the income and expenditure of Social Security are coded on the one hand; and, on the other, those of the central state Administration, Administration bodies and public companies such as Adif and Renfe.

Broadly speaking, there are two approaches to calculating the balance of fiscal balances. The burden-benefit approach, which attempts to determine who benefits from public sector activity and who effectively bears its costs, and the monetary flow, which considers where the payment “physically” goes. “The differences can be important. For example, what do we do with the spending of the ministries, which are concentrated in Madrid but work for all Spaniards? There are those who argue that this should all be pointed out to Madrid, but to others that seems nonsense,” De la Fuente exemplifies. “Catalonia initially makes the calculation with both methods, but then sticks with the second when it comes to making a claim. Here, in addition, there is usually a curious leap into the void: when we demand that fiscal deficits disappear, that each region be left with its own taxes, we are closing the door to any type of territorial redistribution. “No one would think of asking for that on an individual level,” she says.

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