The tax alert is turned on in the autonomous communities. Spain closed 2023 with a public deficit of 3.7% of GDP, which represents a gap of 56,556 million. They are two tenths below the commitment agreed with Brussels. For the fourth consecutive year, public administrations managed to comply with the reference rates required by the European Commission, although the challenge comes this year, when fiscal rules return and the general deficit will not be able to exceed 3%. And it is in the regional subsector where the Government has reflected greater weakness.
According to data published today by the Ministry of Finance, the autonomous communities recorded a deficit of 0.9% last year, exceeding the set reference rate by three tenths. The gap is, furthermore, asymmetrical, since there were five territories in surplus (Asturias, Balearic Islands, Canary Islands, Cantabria and Navarra) and others with a deficit that should lead their governments to “reflection”, defended the first vice president, María Jesus Montero.
Among the non-compliant are the four main autonomies. Madrid’s deficit was 2,108 million, 0.74% of GDP, while that of Catalonia was 3,616 million, 1.31% of GDP. The Valencian Community closed the year with a gap of 3,358 million, 2.45%, and Andalusia with 2,210 million, 1.13%. The communities governed by Isabel Díaz Ayuso and Juanma Moreno even increased their deficit.
Vice President Montero explained that the Treasury was aware that the stability plan was going to be difficult for the autonomous communities to comply with. There are different reasons that explain the non-compliance: there are territories, such as the Valencian Community, that attribute the situation to the financing model, which harms them. Others, to the spending policies implemented due to the crisis derived from the war in Ukraine. The Minister of Finance has also highlighted the management of resources. “It is time for the territories to reflect,” she claimed after making public this information that comes from the territorial auditors and that, therefore, the regional governments know.
Until now the fiscal rules have been suspended, but this 2024 the commitment is already firm. For the autonomous communities, the objective for December is budget balance, so they will have to adjust their financial situation by nine tenths of GDP or more than 13,000 million. Montero has spoken of a “modulation” of spending in the coming months by the autonomous communities, especially the four most important, once his rebalancing plan is present. The first vice president recalled that the path of stability rejected by the Senate gave the autonomies a tenth of a deficit. Local entities, for their part, closed 2023 with a deficit of 0.1%. This year they will have to achieve a surplus of 0.2%.
The central administration, for its part, registered a deficit of 2.1% of GDP in 2023. The result at the end of the year is due to an increase in tax revenue and occurs despite the fact that the Government has spent a portion of this increase in revenue in approving fiscal measures to try to alleviate the economic consequences derived from the war in Ukraine.
The first vice president and Minister of Finance, María Jesús Montero, has highlighted that “the deficit has been reduced by 6.4 points from the maximum in 2022, after the outbreak of the pandemic”, which represents a reduction in the negative fiscal balance of 60,000 million in four years, with fiscal rules suspended. Montero added that this improvement in the fiscal balance “has been achieved without cuts” and has highlighted the Government’s “successful and progressive” economic policy. The first vice president has cited, among other aspects, the record employment figures, which are close to 21 million members, the economic growth, above the EU average, and the distribution of the Recovery Plan as positive elements. “A reduction in the deficit is compatible with a strengthening of the welfare state,” she concluded.
The head of the Treasury has highlighted that during 2023 there will be an expenditure of 17,000 million to help citizens combat the consequences caused by the conflict with Russia. Without that spending, the deficit would have dropped to 2.5%, she stated. In total, since the outbreak of the war, the administration has spent more than 120,000 million on this fiscal aid, discounting credits and guarantees “to protect the middle class and vulnerable groups.”
Tax collection in terms of cash receipts broke records for the third consecutive year. Public coffers grew by 271,935 million euros, which represents a growth in tax revenue of 6.4% compared to 2022 thanks to job creation, improved business profits and increased consumption.
Specifically, personal income tax collection grew by 9.9% last year, up to 120,280 million thanks to the “good performance of the labor market.” There are more people working and with better salaries, which means that the State collects more, despite the reduction in income tax of up to 21,000 euros. Corporate tax, for its part, increased by 9%, to 32,156 million, thanks to the increase in business profits, which grew by 15%. VAT grew by 1.6%, to 83,909 million. That VAT is the tax whose collection has grown the least is explained by the approved tax credits.
Montero has highlighted that the Government has approved in recent years the largest tax reduction in history, at the same time that it has implemented new levies or taxes on energy companies, banks or large fortunes.
The first vice president today ruled out the fiscal model proposed by the Government this week, but she did admit that Catalonia has some fiscal “singularities” that should be reflected in the future financing model. “The model promoted by the Government will be based on the resources that all autonomous communities must have to provide quality service throughout the territory, wherever Spaniards live,” she defended.
Those “singularities” that Montero has spoken of with spending policies that are not currently incorporated into the financing model. He has given the example of the management of penitentiary institutions and other transfers. “With Catalonia there will be no problems in incorporating singularities,” he stated, later adding that “the problem lies in their weight” and that “each territory has a different opinion.” The problem with the reform of the financing model, which has expired since 2014, is that it needs the consensus of the PP.
Regarding the assumption of the debt contracted by the FLA, Montero has advanced that the Treasury is working on a specific law to address the formula and periodicity of the measure. The objective, ministry sources explain, is that indebted territories can access the market to finance themselves totally or partially.
