Almost half of the new regional governments have announced tax cuts. The Balearic Islands, Valencia, the Canary Islands and La Rioja want to almost eliminate the inheritance law immediately. In the case of heritage, what they have made is a promise, just like in Cantabria.
This strategy of tax reductions that was already launched last year in the communities of the PP (and also in some of the PSOE) puts more pressure on autonomies such as Catalonia, which maintain their tax strategy unchanged –with small nuances.
On this occasion, the change has focused on the inheritance tax. In Valencia, the president of the Generalitat, Carlos Mazón, announced the elimination of most of the inheritance and donation tax, ensuring that “we will never again pay twice for the effort and sacrifice of a lifetime.” It will also be retroactive to election day, on May 28. The president of the Balearic Islands, Marga Prohens, also promised to eliminate the inheritance tax for inheritances from grandparents to grandchildren, from parents to children and between spouses immediately.
According to the data compiled by the REAF-Council of Economists with the announcements of these four autonomies, more than half of the Spanish communities will pay little or nothing in most successions, those from parents to children. In the case of wealth tax, the Balearic Islands, Valencia and Cantabria have agreed to eliminate it (by means of a discount). If confirmed, in 5 of the 15 general regime communities it would have been eliminated. And in two others a very low rate will remain.
“Catalonia is becoming an island, being less competitive, which invites reflection,” says the president of the Cercle d’Economia, Jaume Guardiola. “It is known that the location of a tax residence is based on many components,” he adds. In a similar vein, the president of the General Council of Economists, Valentí Pich, believes that “Catalonia should face this new situation.”
In the Catalan community it is where the highest collection of wealth tax occurs and it continues to be where low incomes pay a higher personal income tax. In inheritance tax, the data from the Panorama of Autonomous and Provincial Taxation 2023 prepared by the REAF-Council of Economists highlight that –for a typical case of a son who inherits 800,000 euros from his father– Catalonia is the third community where more is paid once the Valencia change has been approved.
Jose María Durán-Cabré, director of the IEB-UB, explains that the consequences of the tax cuts in neighboring communities are two fundamental. The first is that the “effective competition that lowers taxes generates” causes relocations that governments can try to avoid precisely by also lowering taxes. “The second comes from the greater pressure exerted by citizens on their rulers to reduce the tax burden in line with the neighboring autonomies,” adds Durán-Cabré.
The future of the taxation of the communities will also be very marked by the party that finally achieves the agreements to form a government in Spain. Guardiola remembers that the central executive can set the rules that he considers. In this sense, what the tax on large fortunes does is force the taxation of high incomes in the communities where it is 100% discounted.
In some other autonomies, such as Aragon and Murcia, it is not yet known if a government will be able to be formed. Although if one led by the PP were to go ahead, it is taken for granted that it would follow a similar line in fiscal matters to that of the Balearic Islands and Valencia. In Cantabria, less taxes are also promised.
