International Research Seminar

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

(Geneva, (Geneva, July 2013)

# Tax Equalisation between Spanish Regions

José José M

# 1. Introduction

Spain had traditionally been a unitary country, with two tiers of government, the central government and the local one. The 1978 Constitution introduced a third level of government, the regional one, and Spain started a quite fast process of decentralisation. Nowadays, regional expenditure accounts for around 35% of all non- financial public expenditure, a greater percentage than that of many historically federal countries. Therefore, although Spain is not a federal country from a legal perspective, indeed from a fiscal federalism perspective and its experience in decentralisation, it may be a reference for unitary countries that have started or foresee to set out a political process of decentralisation, such as Morocco.

This paper is divided into three sections in addition to this brief introduction. Section Two aims to briefly explain the historical background. In section Three, the financing systems of the Spanish regions will be described while analysing their features, evolution and current situation. After analysing the Spanish experience, in the last section, the conclusions of this paper will be presented with an emphasis on what issues can be learned and what may be useful to take into account for an autonomous Sahara Region.

# 2. Background

The Spanish Constitution of 1978 marked the recognition of Spain as a democratic country and the creation of a new intermediate level of government, the Autonomous Communities (AC or ACs hereafter), covering autonomous regions. Although the claim for autonomy came in fact only from some regions (particularly, Catalonia, the Basque Country and to a lesser extent Galicia), finally the whole national territory was divided into autonomous regions, altogether 17 ACs, each one with its own autonomous institutions. This is the so- called “café para todos” (coffee for everyone) solution, the option adopted to solve this political problem of how to find a suitable fit for those regions claiming a system of self-government. Consequently, once the autonomic process began, territories that never before had claimed a regional government, also received recognition as ACs.

Nonetheless, the Constitution established two alternative systems of accession to autonomy: the high-speed way, whose pace for the recognition as an AC had to be faster and, in addition approved by referendum, or the slow way, whose pace was wider and for which an affirmative referendum was not required. This difference, although important at the beginning of the process because the level of responsibilities were not the same, became less important once all ACs became responsible for similar competences, mainly those related with the welfare state, such as education, health and social services.

Another difference introduced by the 1978 Spanish Constitution was the recognition of the “historical rights” of the so-called foral territories, which include two ACs, the Basque Country and Navarre. This has indeed been a very important difference, because, as I will later comment, these two regions have enjoyed a very different financing system, both from the point of view of tax power and from the one of the resources available for the responsibilities.

To sum it up, since the late seventies and early eighties, Spain has gone from being a unitary, centralised country to a highly decentralised one, where ACs play an essential role in the provision of public services and take up a significant share of public revenues. As a consequence, although Spain is not a federal country from a legal point of view, its current situation is nowadays much closer to one of federal country than to the one of unitary one, with three levels of government: central, regional and local. In this paper, I am going the concentrate on the regional one.

# 3. The Financing Systems of the Spanish Regions

The allocation of responsibilities among the different levels of government in Spain is set out in the Constitution, which establishes a general framework, and it is more precisely defined in the autonomy statutes of each AC. In general, there are three categories of power: exclusive powers of the State, shared