tax

Spain’s budget for 2017 allocates €1.14 billion to invest in Catalonia, €30 million less than last year. However, as a percentage, the figure represents 13.4% of the total, which is higher than in 2016, which saw only 10.7% investment for Catalonia. The allocation is still below Catalonia’s contribution to Spain's GDP, which is 19%. Although most of the investment is oriented toward infrastructures, the figures are a far cry from the major investment that Spanish President, Mariano Rajoy, announced last week for Catalonia. Indeed, he said that €4.2 billion will arrive in Catalonia by 2020. Spain's Minister of Finance, Cristóbal Montoro, admitted that the budget doesn’t include the promised measures and assured that the investment “will move forward in 2018”.

The Catalan Government’s tax take rose by 8.3% in 2016, totalling 2.9 billion euros. More than half of this came from the real estate sector, which contributed 1.6 billion euros to the treasury due to the growth registered in both the execution of new mortgages and in the buying and selling of previously owned houses. The wealth tax also contributed to this 225.45 million euros, an increase compared to 2015, not only because the fee grew but also because there were more declarants in 2016 than in the previous years. The figures, which include the Catalan Tax Agency’s own taxes and those transferred by the Spanish state, include the new taxes applied in 2016 for the first time. In particular, the treasury benefited from the taxes applied to empty houses, which represented 11.49 million euros and the 2.99 million obtained by charging Co2 emissions produced by public aviation.  

Spain’s call for Catalan leaders to attend the upcoming Autonomous Communities’ summits to discuss regional policies has not changed the Government’s plan for the meetings. The Catalan Vice President and Catalan Minister for Economy and Tax Office, Oriol Junqueras, have refused to attend the Council on Fiscal and Financial Policies (CPFF, going by its Catalan initials) this Thursday, citing other political commitments. Catalan Secretary of Economy, Pere Aragonès, will go instead. For his part, Catalan President, Carles Puigdemont, has already announced he will not attend the Conference of Presidents convened by the Spanish President, Mariano Rajoy, for the 17th of January. “Catalonia has won the right to a bilateral relationship as the demands of the Catalan people have nothing to do with the requests of other Autonomous Communities”, Puigdemont said in October, when he announced that he would not be attending the conference.

The laws for “disconnecting” Catalonia from Spain will not become effective unless the ‘Yes’ to independence wins the 2017 referendum. The spokesman of radical left pro-independence CUP’s national secretariat, Quim Arrufat, said in an interview with the Catalan News Agency that “no step forward will be made unless it is supported through the ballot boxes”. According to Arrufat, all the disconnection laws (the Legal Transition, the Catalan Tax Office and the Social Security System regulations) will have a clause that will impede them from entering into force if the ‘No’ to independence achieves a majority in the referendum. The politician focused on the legal transition law, which foresees the process for the Autonomous Community of Catalonia to become an independent state. He specified that the regulation will be applied in two steps, as part of the law will have to become effective before the referendum in order to call it even if the Spanish Government blocks it. The other clauses would only come into force in case of a pro-independence majority in the referendum.

The Catalan Vice President and Minister for Economy and Tax Office, Oriol Junqueras, voted against the new regional deficit target of 0.6% of GDP agreed between the Conservative People’s Party (PP) and the Spanish Socialists (PSOE). During the Council on Fiscal and Financial Policies (CPFF, going by its Catalan initials) on Thursday evening, Junqueras said that the target is “absolutely far from what citizens need and deserve”. The Catalan Government had asked for a 1.18% deficit target for 2017, but the Autonomous Communities’ limits were set instead at 0.6% for next year, 0.3% for 2018 and 0% of GDP for 2019. They were accepted despite the opposition of Catalonia, the Balearic Islands and Valencia. The communities led by the PSOE abstained. The Spanish Finance Minister, Cristóbal Montoro, celebrated the fact that only three territories voted against the measure, saying there was a “good atmosphere” at the meeting.

The Government’s draft for the 2017 budget was published in the Parliament’s Official Journal this Tuesday. On Wednesday, the different groups in the Catalan Chamber will be able to present appeals and the whole bill will be discussed on the 20th of December. “This is the best budget possible”, Catalan Vice President and Minister for Economy and Tax Office, Oriol Junqueras, stated right after presenting the draft. “The time of cutbacks is over”, he assured and emphasised that the budget for 2017 has been enhanced in comparison to the previous one “both as a whole and in each department”. Indeed, the budget for 2017 allocates €1.1 billion more to social expenditure than the bill for 2015 – which was extended for 2016. The Health System with €8.7 billion and Education and Universities with €5.5 billion are the areas with the highest amounts allocated.

The Government’s draft budget for 2017 presented to the Parliament's President, Carme Forcadell, this Tuesday includes an allocation of €5.8 million to guarantee that the pro-independence referendum scheduled for September will be carried out. In particular, the bill establishes €5 million for electoral processes and €0.8 million for participation. Moreover, the budget also includes hidden allocations which would allow the referendum to take place despite the inevitable suspension of the Spanish Constitutional Court (TC). In 2014, the budget also allocated €6 million oriented toward holding the 9-N symbolic vote in independence. At that time, the allocation was included within the Public Administrations department. However, this time the allocation would be an explicit competence of the Catalan Ministry for Economy and Tax Office. 

According to a study released this Thursday by the Catalan Ministry for Economy and Tax Office, the “autonomic framework” does not leave “enough room” to cope with poverty and inequality in Catalonia. ‘Economy note 103: Analysis and tools to tackle poverty and inequality’, a report that includes 19 extensive articles from around 30 experts, technicians and academics, stresses that the scope of the Catalan Government’s public policies is limited by “the restrictions on powers and availability of income of the current autonomic framework”. In the same vein, Catalan Vice President and Catalan Minister for Economy and Tax Office, Oriol Junqueras, said that this situation has forced him to prepare a budget for next year “that is neither the one Catalans deserve nor what they need” because it does not correspond to the “economic and fiscal effort” made by the citizens.

There will be an allocation in the 2017 budget for the pro-independence referendum, which the Catalan Government will carry out “regardless of the situation”. Thus, the Secretary for Tax Office, Lluís Salvadó, responded to pro-independence CUP’s demands to call a referendum in 2017 even if the Spanish Constitutional Court (TC) could ultimately appeal or suspend the bill. “The Catalan Government has a univocal commitment and the referendum will go ahead”, he stated this Tuesday in an interview with TV3. “We will do it in one context or another”, he added. The bill for 2017, which received CUP’s support last Saturday, also increases social expenditure by 989 MEUR in comparison to the amount allocated for this purpose in 2015. The Government is determined to approve the budget for 2017 and bring the bill before Parliament on the 29th of November.

The Catalan executive and radical left pro-independence CUP are negotiating the fiscal law, the so called Accompaniment Law, for the 2017 budget. The draft is set to include tax reforms as well as the introduction of new taxes especially oriented toward avoiding property speculation. One of the main hurdles has to do with the reform of income tax, which foresees the elimination of tax relief for property purchase for those who earn more than 30,000 euros per year. By applying this modification the Government could collect 11 MEUR in 2018, negotiators estimate. CUP also aimed to increase income tax for those who earn more than 60,000, but this proposal is not apparently on the table.

Visitors coming to Barcelona in 2017 may be levied with a tourist tax. This would be added to the fee Catalonia already applies to people staying in Catalan hotels, camping sites and tourist cottages. The Municipal Commission of Economy and Finance passed on Tuesday a proposal presented by liberal ‘Convergència i Unió’ (CiU) in which the political party asks the local government to consider the application of a tourist tax, fee or public levy. The aim is to balance the costs and benefits of receiving around 30 million visitors each year. The text approved also insists on the necessity of demanding from the Catalan Government the transfer of all the revenue collected from tourists visiting the city, and not just half of it.

Governing cross-party list ‘Junts Pel Sí’ and radical left CUP, the two pro-independence forces in the Parliament, put in place this Friday the basis for the future Catalan Tax Agency. It will be constituted by three bodies: the Catalan Tax Agency, the Board of Taxes and the Fiscal Council. The latter is one of the main novelties of the document registered by the pro-independence groups. The Fiscal Council, a body which doesn’t exist within the Spanish framework, will include representatives from both the public and private sector and will be responsible for advising the Government. The proposal will have to be put to vote after this summer as one of the three ‘laws of disconnection’ from Spain that both groups plan to approve, according to the pro-independence roadmap.

The Spanish Constitutional Court (TC) has unanimously suspended some precepts of the law on fiscal measures which foresees the development of so-called state structures in Catalonia. In particular, the magistrates have considered unconstitutional the plan for the creation of the Catalan Tax Agency, the catalogue of strategic infrastructures and the plans for the energy and railway sectors, amongst others. The suspension, which has now been confirmed, affects the same articles which were temporarily annulled in June 2015 when the Spanish Government asked for legal action against Catalonia’s plans for the creation of state structures. Later, in November 2015, the TC accepted the appeal presented by the Spanish executive to stop the reform of Catalonia’s Tax Agency.

FC Barcelona’s Player, Lionel Messi, and his father Jorge have been sentenced to 21 months in prison after Barcelona’s High Court found them guilty of three counts of tax evasion. The court also ordered the football star to pay a fine of more than 2 MEUR and his father to pay 1.5MEUR. However, as the sentence is under two years, it is unlikely that Messi and his father end up in prison, especially ifthere is no prior criminal report. Moreover, the Court’s decision is not definitive and can still be appealed before Spain's Supreme Court. Messi and his father are accused of having moved 4.1m EUR earned from the player’s image rights to tax havens between 2007 and 2009.  

The stability of the parliamentary term in office and the relationship between the Catalan Government and the radical left-wing party CUP are at risk after the latter decided on Tuesday to maintain its total opposition to the 2016 draft budget bill. The Catalan Vice President and Catalan Minister for Tax Office, Oriol Junqueras, said that the decision will have “extremely severe consequences” and that “social services” will be particularly affected. The Catalan Government spokeswoman, Neus Munté, warned that the stability of the current term was “hit” and regretted that CUP didn’t respect the agreement with the pro-independence cross-party list ‘Junts Pel Sí’, the main party in the Parliament, through which they committed to “guarantee parliamentarian stability”. Munté also warned that CUP’s veto “will have consequences” but emphasised the government’s aim to “continue working to put Catalonia at the gates of independence”. CUP’s rejection of the bill, which they considered insufficient and still too “autonomic”, forces the Catalan Government to extend the 2015 budget.