Catalonia proposes new tax model based on 'full fiscal sovereignty'

The government has proposed a new financial model that would envisage Catalonia collecting 100% of the tax income raised within the territory. 

The "singular financing" model would give the Catalan government "the key to the safe," amounting to around €52 billion per year, the Minister of Economy and Finance, Natàlia Mas Chalk, said in a press conference on Tuesday. 

The proposal includes plans for financial contributions to the Spanish state and to a new territorial rebalancing fund. 

The model is based on "full fiscal sovereignty" and would imply that the government manages and collects taxes including VAT, personal income tax, corporate tax and special taxes, going from managing 9% of tax to 100%. 

The government would receive approximately double the €25.6 billion it received in 2021 under the current model.  

"We are presenting a paradigm shift to leave behind decades of injustice," Mas Guix said. 

The proposal, which the government says is fully constitutional, foresees Catalonia transferring funds to Spain for services provided, such as Defense or administration of justice, and payment to a "territorial rebalancing" fund for Autonomous Communities with fewer resources. 

The amount to transfer would have to be agreed between the two governments. 

'Fair, reasonable, and essential' 

"It is a fair, reasonable and essential proposal," the minister said, preferring not to quantify the amount that would be transferred, in order not to hinder negotiations that she said must be "honest and rigorous." 

The minister, speaking after the government's weekly cabinet meeting, made comparisons with federal states such as Switzerland, Germany and Canada, where regions like Zurich, Basel, Alberta and Ontario, among others, collect and manage the taxes generated in their territory, including VAT, personal income tax and corporation tax. 

"There is no real autonomy without financial autonomy," Mas Guix said. 

Catalonia would not attend any multilateral negotiations between the Spanish government and other Autonomous Communities, the minister added. 

Other proposals from Spain 

The Spanish government responded to Catalonia's proposal on Tuesday, saying that the model must be discussed together with regional governments around Spain. 

"Proposals are coming from the Autonomous Community of Catalonia, but we have also received proposals from other communities," said Spain's Economy Minister Carlos Cuerpo. 

Spanish government spokesperson Pilar Alegría said the will of the Spanish government is to reach an agreement with all of the communities, including those governed by the opposition People's Party (PP).

"We are at an opportune moment, since there are eleven communities governed by the same party, it would be desirable for the PP to submit a joint position from all these communities," Alegría said. 

Spending concerns 

How the Spanish government spends taxes raised in Catalonia has been a contentious issue for successive Catalan governments. 

Last week it emerged that the Madrid region accounted for over half of the Spanish government's investment in public rail company Renfe in 2021, €352m of funding, or 54.6% of the total, while Catalonia received €90.6m, 14%. 

The Spanish government spent only 16% of the budget allocated to Catalonia in the first six months of 2023.