A person from Tarragona pays 15 more taxes than a person from Madrid

A citizen of Tarragona pays 15 taxes more than one of Madrid. It is the difference between the two extremes in the comparison of the fiscal pressure between autonomous communities. Madrid does not have its own taxes while Catalonia reaches the fortnight and reaches the record in Spain: from a toll for empty houses to carbon dioxide emissions from cars, through sugary drinks. This follows from the Autonomous Index of Fiscal Competitiveness (AICF) of 2022, prepared by the Foundation for the Advancement of Freedom.

The report determines that «Catalonia has three times more regional taxes than other communities» and occupies the last place in this ranking in terms of competitiveness. The study points out “major deficiencies in wealth and inheritance tax”.

This balance explains that own taxes barely represent 2.3% of tax revenue, although most of it, 78%, comes from the water canon, a percentage very similar to that of the other autonomous communities (73%). "These regional taxes create a bureaucratic burden for SMEs that does not compensate its collection power, in addition to the cost of litigation, since many of them have been declared unconstitutional", indicates the entity, which suggests: "For all this and for its poor collection capacity It is recommended that the autonomous communities repeal all regional taxes and, if they maintain any, the tax related to water would be the most appropriate.

The Index holds that Catalonia has been incorporating its own taxes in recent years. It recommends, among other measures, “repeal the wealth tax or reduce it to 100%”reform the income or change the tax rate in the Documented Legal Acts (AJD).

The Autonomous Tax Competitiveness Index (ICAF) takes into account the effect of these taxes on the climate of business activity, economic growth and employment, the complexity and simplicity of the application of tax models, their transparency and the use and cost of these resources, among other factors.

The more taxation in a territory, the more options to lose highly qualified professionals

A higher number of taxes does not, according to the canons of the study, promote tax competition, but rather the opposite. The premise, based on postulates based on a liberal ideology, is that "a territory with lower tax costs is more attractive for investment and, therefore, generates a favorable breeding ground for economic growth». “Taxes reduce the profits of companies and the disposable income of taxpayers”, they point out.

Roger Medina, an economist and researcher at the Institut Ostrom, argues that "higher taxation may have consequences on competitiveness" and gives some examples: «Imagine an employee who can telecommute and must choose to reside in Barcelona or Madrid. Perhaps he can opt for the place where he will pay less. Having a high tax rate can cause problems to attract investments or highly qualified professionals, so fiscally there is room for competition ».

Trust in institutions

For Medina, ultimately everything depends on "politics and ideology" and points to another debate: «If we want to have a fully comparable taxation to the European one, it must be preceded by a greater institutional confidence of the citizen in the administrations, because he knows that there will be a good use of the resources. And in recent times here the institutional quality has deteriorated».

"Greater taxation means more production costs and affects the profit margin," says Benja Anglès, Professor of Tax Law at the UOC

Benja Anglès, professor of Financial and Tax Law at the UOC, believes that "higher taxation can reduce competitiveness in economic terms, since companies with headquarters in Catalonia have higher costs and the tax factor directly affects production costs and , therefore, at the profit margin, so that, the more taxation, the more possibility of losing investments».

More volume of income does not always translate into greater spending on public services. "Governments and parliaments decide and prioritize the amount and destination," says Anglès, who gives a comparative example: "Catalonia, with budget revenues of almost 40,000 million euros in 2021, allocates 25% to health, on 17 % to education, 6% to social services and 27% to pay public debt. The Community of Madrid, with 25,000 million, dedicates 32% to health, 20% to education, 7% to social services and 12% to debt.

Tarragona capital is the city of Spain with less economic freedom

Tarragona capital fails in the Index of Economic Freedom of Spanish Cities (Ilece), another study also prepared by the liberal think tank Foundation for the Advancement of Freedom. The capital appears in the last position of the list of 50 most populated cities in Spain. The analysis, published in July of this year, takes into account areas such as economic performance, the magnitude of the staff of its city council, the economic interventionism of the municipal government and fiscal pressure. The report calls economic freedom in the city "lousy."

At the other extreme, Alicante appears, governed by the Popular Party, in the first position. Figure ahead of Santa Cruz de Tenerife and Almería. We must take into account the ideal of the starting point of this study, which bases its canon on “avoid all forms of municipal interference in the economyand especially the regulations that seek to harm emerging forms of economic interaction, especially in the collaborative economy. Regulation, control and intervention in certain areas are, therefore, sanctioned parameters by this 'think tank'.

He maintains the diagnosis that "it is very unfortunate that some city councils, led by ideological positions or the influence of some lobbies, are limiting the development of transport, accommodation and other forms of direct interaction between individuals through the technological platforms that facilitate it" .

“It is urgent to reduce the tax burden”

Tarragona used to frequent the queue positions of this comparative relationship but it is the first time that it occupies the last place. The capital "narrowly passes in the area of ​​macroeconomic data" but fails in the other areas. The study says that "It is urgent to contain or reduce staff and cost of it" and is committed to "reducing the tax burden borne by the people of Tarragona".

Analysts are especially critical of this last point of the tax burden. In a relationship in which the lower the pressure, the higher the score, Tarragona reaches a figure of 7.65 out of 30. According to this perspective, the council also focuses on the concept of economic interventionism. It only gets 8.12 points out of a possible 20 – the lower the regulation, the higher the score.

Where the city does appear somewhat better is in economic development. It achieves a balance of 18.21 points out of 30. This scale is drawn up based on indicators such as the budget, indebtedness, delinquency, the volume of companies or the amount of subsidies. Here we start again from an assumption with a strong ideological character: a very high number of grants reduces economic freedom in the municipality.

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