International Research Seminar

“AUTONOMY STATUTES AND REGIONALIZATION: SOLIDARITY AND EQUALIZATION BETWEEN REGIONS”

(Geneva, (Geneva, July 2013)

# 3.2 The Spanish Financing System of the ACs of Common Regime

## Initial Phase

Article 157.1 of the Spanish Constitution states that:

### “The resources of the Self-governing Communities shall consist of:

- a) Taxes wholly or partially made over to them by the State; surcharges on State taxes and other shares in State revenue.
- b) Their own taxes, rates and special levies.
- c) Transfers from an inter-territorial compensation fund and other allocations to be charged to the State Budget.
- d) Revenues accruing from their property and private law income.

### e) Interest from loan operations”.

The following article, no. 158, of the Spanish Constitution further details the concept of “inter-territorial” solidarity by noting that:

“1. An allocation may be made in the State Budget to the Self-governing Communities in proportion to the amount of State services and activities for which they have assumed responsibility and to guarantee a minimum level of basic public services throughout Spanish territory. 2. With the aim of redressing inter-territorial economic imbalances and implementing the principle of solidarity, a compensation fund shall be set up for investment expenditure, the resources of which shall be distributed by the Cortes Generales (Parliament) among the Self-governing Communities and provinces, as the case may be”.

In order to comply with the institutional mandate, the 8/1980 Law was adopted, regarding the financing of the ACs. The law regulates the fundamental frame of the autonomic financing. As expected, this system has suffered various reforms throughout the course of time to comply with the greater role of the ACs regarding their expense competences.

Indeed, there was a progressive transfer of competences from the State to the AC done at different paces depending on the AC. The State also estimates the amount of resources each community should receive according to the competences they manage and by using the effective cost of the services in the moment of the transfer as a basic element for the assessment of the amount. The financing of these services is initially done by ceding certain taxes and by transferring a general grant known as “participation in the general revenues of the State”. The ceded taxes in this first stage are mainly related to wealth (basically, Annual Net Wealth Tax, Inheritance and Gift Tax, and Capital Transfer Tax and Stamp Duty), which therefore are not very significant from a revenue perspective. ACs are responsible for their administration, but they cannot introduce legal changes to them.

ACs can also levy their own taxes and fees, although they cannot levy any taxable event already taxed by the State or municipalities, which in fact means they can only implement minor taxes as most important events are already taxed. Furthermore, ACs may under no circumstances introduce measures to raise taxes on property located outside their territory or likely to hinder the free movement of goods or services.

Consequently, the main revenue source of the ACs, in this first stage, will be the amount of grants received. The grants will be specific whenever they correspond to certain expenses or general whenever their scope is the financing of the totality of expenses of a community, and is calculate as a percentage of the total taxes of the State.

## Evolution

The 8/1980 Law which regulated the financing system of the ACs under the common regime, established that a revision of the model shall take place every 5 years, with the objective of allowing it to adapt to a changing reality, especially in what regards the increasing role of the ACs in the expenses policies. This is why we can observe a new financing system for the years 1981-1986, 1987-1991, 1992-1996 and 1997- 2001. In 2002, a definitive financing system was established in order to give the Spanish autonomic system a final form. Nonetheless, the always-changing Spanish reality of the following years, has forced the implementation of a new system in 2009 and the reintroduction of the five year revision clause.