Andalucía is fourth best at collecting state tax revenue in Spain but among those that benefit the least

With the region's per capita income being well below the national average, the new taxation system for Catalonia would be even more detrimental to the area

Cristina Vallejo

Madrid

Monday, 21 October 2024, 16:45

Andalucía received nearly 19 billion euros in 2023 from state taxes managed by Spain's main tax agency (AEAT). It is AEAT that collects all key taxes that fall under the common tax regime for central and regional governments - basically personal income tax (IRPF), corporation tax, non-resident income tax, IVA (Spain's sales tax on goods and services) and other special taxes. This figure puts it in fourth place in terms of tax revenue under the common system behind Madrid (over 120 billion euros), Catalonia (53.54 billion) and the Valencian community (close to 20 billion). It is also well ahead of fifth-placed Galicia, whose revenue from the aforementioned taxes barely exceeded 10.25 billion euros last year.

But in relative terms, while Andalucía ranks fourth in terms of revenue, it sits at the bottom in terms of per capita payments. Those nearly 19 billion euros (almost 18.92 billions to be exact) must be divided by a population of 8.6 million, which implies an average of less than 2,200 euros per capita in benefit from state taxes.

The first two places in the revenue rankings per inhabitant are occupied by Madrid and Catalonia. The former stands at 17,214 euros (the more than 120 billion euros are divided between just over seven million inhabitants), and the latter, with 6,673 euros per capita, has the 53.54 billion euros divided amongst just over eight million inhabitants. Cantabria is the other region where the average per capita income exceeds 6,000 euros.

There are only three regions where per capita income is lower than in Andalucía. These are the Canary Islands at 1,691 euros per capita (nearly 3.8 billion euros for the 2.24 million inhabitants), Extremadura, with 1,851 euros per inhabitant (the 1.95 billion euros in revenue are divided among just over one million inhabitants) and Castile-La Mancha, with 2,030 euros (the almost 4.27 billion euros collected in state taxes are distributed among 2.1 million inhabitants).

Regional losers and winners

Sources at AEAT have reservations as to whether it makes sense to measure tax collection per capita by region. They argue that, in the data based on the collection reports published monthly by AEAT itself, the regions are only "the window through which the tax is collected." They give the following example of an employee at El Corte Inglés in Malaga. The tax withholdings made by the company will appear in the Madrid tax office because the company has its headquarters in that region and that is where it pays taxes. However, if the employee's income tax return from the chain's Malaga establishment is paid in, as he or she lives in Malaga, the amount of that income will appear at the Andalusian tax office. Fedea (an independent, economic think tank in Spain) researcher Ángel de la Fuente uses the same argument to advise against making these calculations.

César García Novoa, Professor of Financial and Tax Law at the University of Santiago de Compostela, agrees that Madrid's large tax revenues are due to the fact that most of Spain's large companies have their registered offices there. This case can also be applied to Barcelona despite the bulk of their productive activity not happening in that region. He suggests a better way of obtaining a more accurate picture of how much tax revenue is generated in each region - regardless of where the payment is made - would be by looking at GDP per capita, given that this is the indicator responsible for measuring the goods and services produced in each region. In other words, GDP per capita tells you how much wealth is generated each year in any given region.

Per capita income

21,254 euros GDP per capita in Andalucía

This is the lowest figure in Spain. The highest corresponds to Madrid, where it exceeds 38,000 euros. The Catalan figure is over 32,000 euros.

In the absence of the regionalised GDP per capita data for 2023 that the INE (Spain's national statistics institute) will publish at the end of 2024, we have taken the absolute GDP data for 2022 along with the growth forecast that AIReF (Spain's independent authority for fiscal responsibility) had for 2023. The GDP was then divided by the number of inhabitants. Thus, while Andalucía is in fourth place as the region that generates the most tax revenue from the main state taxes collected, and is fourth from last in terms of per capita revenue, in terms of GDP per inhabitant it is the last, the one with the lowest earnings indicator at 21,254 euros. This compares starkly with 38,111 euros in Madrid and more than 32,500 euros in Catalonia.

The fact that there is a concentration of large tax-paying companies in Madrid and the arguments made by AEAT and the Fedea researchers gain strength with these latest figures. Thus, the more than 120 billion euros paid in state taxes in Madrid is more than six times the almost 19 billion euros in Andalucía and yet the economic activity generated in Madrid is worth only 38,111 euros per capita, less than double the 21,254 euros in Andalucía.

This becomes a pertinent question when the redesign of Catalonia's financing model is on the table. As Prof García Novoa explained, it is likely to consist of the Generalitat (the Catalan regional government) managing all the taxes paid in Catalonia: "It is the system of the Basque territories, which contribute to the common expenses of the state after collecting everything." He continued: "Whenever there is a relationship between different treasuries, the 'strong' one is always the one that collects and transfers. In the common tax regime for the regions, it is the state that collects personal income tax, corporate income tax and IVA, which are the ones that provide the most revenue, and then transfers it all to the autonomous regions. With Catalonia it will be the other way round."

As the Fedea researcher, Jorge Onrubia explained, according to the agreement signed between the PSC and ERC (the leading left-wing and socialist parties governing in Catalonia), the Generalitat would collect 100% of the state taxes whose payment is due in that region. From there, the Catalan government would calculate the cost of the services not transferred to the Generalitat that the central government provides in Catalonia, so there would be a part of the revenue that it would return to central government for the cost of these services, plus a part, which is not yet agreed and is a matter of dispute, which would be a solidarity contribution to the rest of the autonomous regions (with the exception of the Basque Country and Navarre). What is now the contribution that Catalonia, Madrid or the Balearic Islands make to the common financing system with below-average fiscal capacity would become a solidarity figure, the amount of which would be set unilaterally by the Generalitat, as ERC has insisted. Moreover, this would not be a permanent share-out, but would be subject to an assessment of how well the monies have been put to use by the receiving regions. In this situation, Onrubia believes that the regions in the common tax regime, which includes Andalucía, would receive less than they have been receiving to date. That said, central government could compensate for this by raising taxes, which would not affect Catalonia, the Basque Country or Navarre, or by reducing public spending.

The Spanish government has also floated the idea that all the regions could manage state taxes, although without stipulating how this would be done and the role that the national tax authorities would play. This opens up another source of risk for the regions with lower per capita income.

Top 50

Esta funcionalidad es exclusiva para registrados.

Reporta un error en esta noticia