Tuesday

19th Oct 2021

Opinion

Catalonia's fiscal feud with Spain

  • The main issue is that Catalonia pays a lot more tax than they receive back for public expenditure (Photo: Matthias Oesterle/ZUMA Wire/dpa)

With the recent appointment of Pere Aragonès as president of the Generalitat, and the Republican Left Party of Catalonia (ERC) forming a pro-independence coalition with Junts, Catalan independence is once again a hot topic.

That discussion amplified last month, with talks of a potential pardon after a Supreme Court report on the Catlan political prisoners.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

  • Expensive high-speed rail projects which mostly are directed towards Madrid and connect towns with very small populations have been labelled "poor value" (Photo: Miquel González Page)

With an imminent face-to-face meeting between prime minister Pedro Sánchez and president Aragonès, the topic of Spanish economic domination, and the lack of fiscal federalism amongst its regions, is once again kicking off.

It's not uncommon to hear accusations of Catalan financial greed as a motivation for secession. But the reality is, the economic relationship between Spain and Catalonia is a nuanced one, which many Catalans believe is historically, and still now, based on domination.

The main issue is that Catalonia pays a lot more tax than they receive back for public expenditure. According to economics professor Elisenda Paluzie, Catalan residents represent about 16 percent of the country's population.

Yet these same residents contribute 20 percent of Spain's taxes, and then receive 14 percent back for public expenses.

The common justification for this fiscal inequality is that the surplus money goes to poorer regions of Spain, such as Andalusia.

Here, people are generally poorer, so the argument goes that richer regions such as Catalonia should be supporting them. The problem with this argument is that whilst on a macroeconomic level Catalonia may be a wealthier region of Spain, not every individual in Catalonia is personally wealthy.

Whilst extra funding goes to the poorer regions of Spain, which is not the issue for most Catalans, insufficient funding goes to services in Catalonia. This means that whilst the richer Catalans may be able to get by, the poorer citizens of the region are left with what many believe are underfunded and inadequate social services.

Common complaints are centred around lengthy waiting times for healthcare, poor infrastructure, and expensive toll roads. This is despite the fact that Catalonia's economy is around the same size of Portugal's and is only fractionally smaller than Madrid's.

Further dissent lies around questionable infrastructure projects funded by the national government which many Catalans argue are not in the best interest of the whole country.

Expensive high-speed rail projects which mostly are directed towards Madrid and connect towns with very small populations have been the face of this budgetary debate. Labeled by The Economist as being "poor value", Spain has the second highest spanning of high speed rail lines in the world, second only to China.

But despite so much funding and construction of these lines, the Spanish government rejected a high speed line that would avoid Madrid and connect stations along the Mediterranean directly to Spanish ports, many of which are located in Catalonia.

Low-tax capital

Despite Madrid controlling the large majority of Spain's economic decisions, the region's income tax levels are the lowest in all of Spain, categorising the region as what many call a tax haven.

What many Catalans find frustrating is that they are criticised for lack of solidarity, yet they are paying more than the other regions, receiving less funding themselves, and most importantly, have minimal autonomy over fiscal matters.

This sentiment of economic domination has been felt in Catalonia ever since the war of the Spanish Succession in the 18th century, but was particularly antagonised when the 2006 autonomy statute was trimmed by more than 50 percent. The Constitutional Court then ruled 14 articles from the statute unconstitutional which, in turn, meant that Catalonia could not increase its funding powers.

A minimal say in the Spanish national context on economic decisions must be paired with the grim reality, for Catalans, of a minimal say in the European context.

Autonomous regions do not reap the same policy powers as federal units such as the German Länder, and many Catalans have felt like independence is their last option to have a sufficient influence over their economy.

Secession problems

This is not to say that independence would be a problem-free economic win for Catalonia.

If Catalonia was to secede, they would need a unilateral vote from member states, including that of Spain, to join the EU. Spain would almost certainly vote against and in turn, Catalonia would face expensive transition and trade costs with the EU - its biggest import and export partner.

Catalonia also has some of the highest regional levels of debt in Spain, adding another grey area to secession regarding who would pay for or absorb this debt. However, even with economic obstacles to overcome, the ERC are prioritising their road towards a Catalan republic and the reclaiming of the Catalan economy.

Aragonès, who has an impressive background in economics, is known for his calculated scrutiny of superfluous tax-spending, detailed in Spain's Official Gazette. He has a master's in economic history from the University of Barcelona, and is the former economy secretary of Catalonia.

Aragonès, and the pro-independence bloc, are expected to prioritise the rebuilding of Catalonia's economy after the devastating effects of the pandemic on a region heavily-dependent on tourism.

What still is not certain, is how much say Madrid will have over the way this rebuilding transpires.

Author bio

Tom Canetti is a freelance journalist in Barcelona, focussing on corruption, conflict, macroeconomics, and political developments in Catalonia and the EU.

Disclaimer

The views expressed in this opinion piece are the author's, not those of EUobserver.

Opposition outrage at Sánchez plan to pardon jailed Catalans

Spanish prime minister Pedro Sánchez is considering pardoning the Catalan separatist leaders convicted over their role in the 2017 independence bid - triggering a new row between the coalition government and opposition parties.

Catalan MEPs lose immunity, slam 'political persecution'

Catalan separatist MEPs Carles Puigdemont, Toni Comín and Clara Ponsatí lost their parliamentary immunity - a result they have hailed as a "political victory" for bringing the conflict between Catalonia and Spain closer to the heart of Europe.

Conservatives' Covid-strategy wins in lockdown-fatigue Madrid

Madrid conservative leader Isabel Diaz Ayuso has become a political phenomenon mainly because of her success in keeping Madrid open during the worst moments of the pandemic. However, critics accuse her of neglecting health services - while only protecting businesses.

Spain's Court of Auditors vs Catalan independence

Only days after what some considered to be a detente between the Spanish government and pro-independence Catalans, ex-Catalan politicians and their associates tied to the independence movement have been charged millions of euros for the misuse of public funds.

Weaponising transport in the Spain vs Catalonia saga

A canned €1.7bn Barcelona airport project did not come as a surprise to many Spaniards and most Catalans. Transport infrastructure in Spain is governed with an underlying mandate of protecting Madrid as the central node of political power.

Time for EU to grow up as a democracy

Conference on the Future of Europe must address shortcomings in the EU model of 'dual democracy' and prevent backsliding in member states.

Stakeholders' Highlights

  1. Nordic Council of MinistersNew report reveals bad environmental habits
  2. Nordic Council of MinistersImproving the integration of young refugees
  3. Nordic Council of MinistersNATO Secretary General guest at the Session of the Nordic Council
  4. Nordic Council of MinistersCan you love whoever you want in care homes?
  5. Nordic Council of MinistersNineteen demands by Nordic young people to save biodiversity
  6. Nordic Council of MinistersSustainable public procurement is an effective way to achieve global goals

Latest News

  1. EU lags behind on 'military ambition'
  2. Let us help protect EU funds in Balkans, NGOs say
  3. Snubbed and hated: How Slovenia's Janša treated MEPs
  4. EU leaders meet This WEEK amid EU-Poland clash
  5. MEPs urge Sassoli to sue EU Commission on rule of law
  6. MEPs seek EU law on bogus anti-media litigation
  7. Africa seeks EU help on global vaccine-waiver
  8. Giant of 20th century European design recognised by EU

Join EUobserver

Support quality EU news

Join us