Latest calculations of Catalonia’s fiscal deficit with Spain

Catalan Minister of Finance Andreu Mas-Colell presented just about one month ago the calculations of the Catalan fiscal deficit with Spain until 2009. The original report can be found here. The results are along the lines that we already knew from before. The average fiscal deficit of Catalonia with Spain every year from 1986 until 2009 amounts to about 8% of the country’s GDP. The fiscal deficit with Spain in 2009 was 16409 million euros. Therefore being in Spain cost every Catalan person 2251 euros that year.

Spain has a system of centralised tax collection but decentralised spenditure, meaning that in the case of Catalonia, the Generalitat provides the most expensive services, like healthcare or education, but only collects around 5% of the taxes. The remaining 95% are collected by the Spanish Tax Ministry. This is not the case for the Basque Country and Navarre, which do collect their taxes.

The Spanish Central Government then decides how much goes to each Autonomous Community. This causes a redistribution of wealth resulting in public spenditure per person differing greatly from some Autonomous Communities to others. This “redistribution of weath”, is unlimited and uncontrolled. Meaning that there is no law to define how much of this forced “solidarity” is taken away every year to subsidize poorer Spanish Autonomous Communities or for how long this situation should continue to go on.

The Spanish system doesn’t respect several principles, first should be transparency. Secondly, this “redistribution” should have a limit so that it doesn’t hurt the economy of the “donor”. Obvioulsy 8% of Catalonia’s finances is too much. No economy can be unaffected by the loss of 8% of its resources every year for very long. Thirdly, the “principle of ordinality” is not respected. This means that a donor should never go down in the ranking of wealth because of wealth redistribution. However, Catalonia, compared with the Spanish Autonomous Communities goes from being the 3rd in the ranking before redistribution to the 11th, below the receivers.

This drainage results in Catalonia being the European region with the highest fiscal pressure. The newspaper El Punt Avui published a study by the Cercle Català de Negocis which calculated that 40% of the Catalan taxpayers’ money goes to Spain and never comes back.

This causes a mass destruction effect on the Catalan economy. For instance, last years’ Tsunami disaster in Japan caused it to lose an estimated between 3.6% to 5.7% of its yearly GDP.

In other european countries like for instance Germany, its richest land’s, Bavaria, fiscal deficit in 2010 was only 3491 million euros despite its economy almost doubling that of Catalonia in size. Compare that with Catalonia’s 16409 million euros.

The repeated efforts of the Catalan political forces to limit this to reasonable levels have always hit a wall, with the latest chapter being the 2006 Catalan Statute of Autonomy being declared as unconstitutional in 2010 by the Spanish Constitutional Court after having been voted in a referendum by the Catalan people.

The Spanish government only has published this fiscal data once in the last 30 years, in 2008. Catalan parties keep demanding it to be published regularly but since the Spanish government has refused to do so the Generalitat has decided to publish them anyway.

On the report from 2008, which can be found here, and covered all Spanish Autonomous Communities, data showed that in terms of GDP, the main three net contributors within the Spanish State are the Catalan speaking Countries: Catalonia, Balearic Islands and Valencian Country. With the Balearic Islands fiscal deficit amounting to a whopping 14.20% of its GDP. The fourth contributor was Madrid, even though it is, on the other hand, greatly benefited by being the Spanish capital.