Catalan businesspeople annoyed with Spanish Government for not issuing fiscal balances

The Catalan business community is deeply annoyed with the Spanish Government for not publishing transparent data on Catalonia’s fiscal contribution to the rest of Spain and therefore not recognising the fiscal deficit. The Spanish Finance Minister, Cristóbal Montoro, was supposed to issue the so-called fiscal balances last December but their publication was inexplicably delayed. Last Friday, in late January, Montoro announced the fiscal balances would no longer be calculated and published in the present form; instead, he would publish in March the “regionalised public figures” stating the costs of public services per citizen because the fiscal balances were “incomplete and incoherent”. However, on Tuesday, the Minister recognised that they were “correct” but “wrongly used” to support Catalan independence claims.

The Spanish Finance Minister on Friday in Barcelona's People's Party convention (by R. Garrido)
The Spanish Finance Minister on Friday in Barcelona's People's Party convention (by R. Garrido) / ACN / Gaspar Pericay Coll

ACN / Gaspar Pericay Coll

January 28, 2014 01:43 PM

Barcelona (ACN).- The Catalan business community is deeply annoyed with the Spanish Government for not publishing transparent data on Catalonia’s fiscal contribution to the rest of Spain and therefore not recognising the fiscal deficit. On Tuesday Catalonia’s main employers association – Foment del Treball – demanded “top transparency” regarding the so-called fiscal balances, which calculates how much money Catalan citizens and companies pay each year to the Spanish Government in taxes and how much of this money comes back to Catalonia in the form of investments, infrastructures and services. Furthermore, on Monday, Luís Conde, President of Seeliger y Conde, stated in a radio interview that businesspeople were outraged for not publishing such information and changing the calculation method. Conde had organised on Saturday in his country house a VIP lunch for over 250 guests, including several Spanish and Catalan ministers, political leaders and some of the main employers in Catalonia. The closed-doors meeting with Catalonia’s main decision-makers and Spanish authorities was held on the second day of the convention organised in Barcelona by the People’s Party (PP), which runs the Spanish Government. The day before the lunch, the Spanish Finance Minister, Cristóbal Montoro, announced that the so-called fiscal balances would no longer be calculated and published in the present form. Montoro was supposed to issue them last December but their publication was inexplicably delayed. Instead, in late January, he said he would publish in March the “regionalised public figures” stating the costs of public services per citizen. This announcement caused great astonishment and frustration among Catalan politicians, businesspeople and academics, since there were great expectations to know how much of the Catalan taxpayers’ money is spent in the rest of Spain. The change of criteria implies that the Spanish Government refused to publish this information in order not to fuel the support of Catalan independence.

Previous studies have shown that Catalonia’s fiscal deficit represents an average of 8% of its GDP, which means that each year Catalans give away 43% of their taxes, some €16 billion per year. The Spanish Government only published this information once, in 2008 with data from 2005; it posted a fiscal deficit between 6.38% and 8.70% for Catalonia that year (depending on the calculation formula). Another study from the Catalan Government showed that an average of 8% of Catalonia’s GDP has been annually transferred to the rest of Spain between 1986 and 2010 using the money flow formula (which is the most-commonly used calculation). This means that Catalans have given 200% of Catalonia’s GDP to the rest of Spain in 25 years, an amount that nowadays represents some €400 billion. The annual budget of the Catalan Government, which exclusively pays for public healthcare, education and social policies, amounts to €29.31 billion for 2014; in 2012 it posted a deficit representing 2.21% of Catalonia’s GDP (some €4.4 billion).

The fiscal agreement proposed by the President of the Catalan Government, Artur Mas, to the Spanish Prime Minister Mariano Rajoy in September 2012 was aimed at addressing this issue. It was guaranteeing Catalonia’s solidarity with poorer territories but at the same time it was including some limitations to ensure that Catalan public services are not under-budgeted compared to other parts of Spain. The proposal had been widely discussed in Catalonia among all the political parties, including the PP, and it was backed by most of the Catalan business community. Back then, it was also backed by some 80% of the Catalan population. Rajoy totally rejected the proposal and refused to even discuss about it in further meetings. Since then, the Catalan President stopped publicly defending a new fiscal agreement and he backed the self-determination claims. A month ago, a majority of the Catalan Parliament groups led by Mas agreed on an exact date and question wording to hold a self-determination vote in Catalonia.

Montoro criticised the fiscal balances but now says they are “correct”

On Friday, the Spanish Finance Minister justified the decision to cancel the publication of the fiscal balances by saying they were “incomplete and incoherent”. Montoro also criticised the Catalan Government for basing its claims on these figures. However, after hearing the reactions of the Catalan business community last weekend and on Monday, he changed his stance. On Tuesday, Montoro recognised that the fiscal balances are “correct” and “they are OK”. However he added they are “wrongly used” to support Catalan independence claims. “There are people who think that they need to become independent because of the fiscal balance of their territory”, he stated. According to him, the fiscal balances enabled “to transfer the citizens’ ideas” that were used to foster “a spirit of confrontation” instead of “a vision for integration”. “Far from rationalising the debate, what they have brought is a confrontation”, Montoro said on Tuesday. He insisted that “territories do not pay taxes but citizens do” and for this reason he insisted on providing the “regionalised public figures” in relation with the costs of public services. The aim is to offer “new arguments” and to “go beyond the limitations of the current method”, he added.

The Catalan Government accuses Montoro of “censorship” and making a “partisan use” of this information

On Tuesday, the Spokesperson of the Catalan Government, Francesc Homs, accused the Spanish Finance Minister of making a “partisan use” of the information to calculate the fiscal balances between Catalonia and Spain. Homs considered that the Spanish Government was “censoring” this information as a “retaliation” to “punish” Catalonia for the independence claims expressed by a large part of the society. The Catalan Government asked the Spanish Prime Minister, Mariano Rajoy, to rectify and publish the fiscal balances. He pointed out that Rajoy had announced they would be published before the end of 2013. Homs added that the change of criteria and hiding these figures “does not help rationalising the debate” on the relationship between Catalonia and Spain.

On Friday evening, a few minutes after Montoro announced he would not be publishing the fiscal balances, the Catalan Finances Minister, Andreu Mas-Colell, asked the Spanish Government to publish the information in order to enable other people to calculate the fiscal balances. “Data is power, and we want transparency with the data”, Mas-Colell emphasised. “We want the data” he demanded. Mas-Colell, who is a former Professor of Economics at Harvard and Berkley, had suggested a few days ago that the fiscal balances should be calculated by independent international experts, in order to guarantee transparency and shed light on this crucial aspect regarding the relationship between Catalonia and Spain. On Friday, Mas-Colell said he was “disappointed” about Montoro’s announcement. Furthermore, on Sunday, the Catalan President, Artur Mas, had stated that not publishing this information is a way “to cover up a problem that annoys” the Spanish Government. It is a way “to cover up” the “existing inequalities in Spain to impoverish the productive territories”, he added.

Catalan employers request “top transparency”

The main employer association in Catalonia, Foment del Treball, considered it was “convenient” to publish the fiscal balances with the traditional methodology. In a press release, Foment stated that the publication of regionalised public figures does not justify not publishing the other information. The Catalan employers association, chaired by Joaquim Gay de Montellà, added that the new calculation can complement the traditional methodologies and that both should be offered. Both systems “can coexist with the objective to shed greater light and offer greater data, with the will to help taking informed decision based on objective figures”. Foment requested “top transparency” from the Spanish Government.

A fairer fiscal scheme for Catalonia is “strategic” to recover from the economic crisis

Besides, the employers association added that solving the Spanish Government’s investment deficit in Catalonia and the insufficient funding of the Catalan Government to pay for public services “is strategic to ensure the competitiveness of the Catalan economy”. On Friday, while announcing the cancellation of the fiscal deficit, Cristóbal Montoro also praised the Catalan economy for being Spain’s main engine and “putting the country out of the [economic] crisis”. The day before Montoro’s speech it was published that Catalonia is leading Spain’s unemployment reduction with a drop of 64,500 Catalan jobseekers while in the whole of Spain unemployment decreased by 69,100 people.