The fiscal deficit between Catalonia and Spain

This study presents the results of the fiscal balances of Catalonia for the period 2006-2010, the settlement of the financing model of the Spanish Autonomous Communities in the common tax system ending two years after the natural year.

Here it should be indicated that two of the autonomous communities, the Basque Country and Navarre, are omitted from the study because they benefit from a special fiscal regime due to their historic (ʻforalʼ) tradition.

To calculate 2009 and 2010, a small adjustment must be made that permits all elements of the new model of financing of the Spanish Autonomous Communities in the common tax system to be included. Although not approved until the end of the year, this new model was in force throughout 2012. The current financing model was approved on 18 December 2009 (Law 22/2009, of 18 December, regulating the financing system of the Spanish Autonomous Communities in the common regime, and of cities with a statute of autonomy, and modifying certain fiscal regulations) and accepted by the Joint Committee on Economic and Fiscal Affairs of the Spanish and Catalan governments on 22 December 2009).

The calculation of the 2009 and 2010 balances therefore includes the advance of extra-budgetary funds by the Spanish Administration to the Autonomous Communities, as additional resources paid into the autonomous financing system (obviously, this advance must not be charged to the fiscal balance of the year in which the amount is entered, to avoid duplication in the calculation).

Table1: Fiscal balance of Catalonia in relation to the Spanish public sector 2006-2010
Neutralised for the economic cycle. Money flow

Million euros
 20062007200820092010
Taxes paid by Catalonia: 47,786 51,823 57,403 61,812 61,872
Expenses received in Catalonia: 33,293 35,910 40,203 45,403 45,329
Balance -14,493 -15,913 -17,200 -16,409 -16,543
% / GDP -7.9% -8.1% -8.5% -8.4% -8.5%

In times of economic crisis and high unemployment rates, the money flow method is even more significant, since the Government’s spending policies have a great impact in stimulating receptor economies. It can therefore be concluded that Catalonia is suffering a continuous shock of contraction as a result of the fiscal deficit of the Autonomous Communities.

The benefit flow method also shows a slight worsening of the Catalan fiscal deficit during the years analysed.

Table 2: Fiscal balance of Catalonia compared with the Spanish public sector 2006-2009
Neutralised for the economic cycle. Benefit flow

Million euros
 20062007200820092010
Taxes paid by Catalonia: 47,025 50,907 56,300 60,460 60,577
Expenses received in Catalonia: 36,705 39,771 44,440 49,199 49,319
Balance -10,320 -11,136 -11,860 -11,261 -11,258
% / GDP -5.6% -5.6% -5.9% -5.8% -5.8%

The benefit flow method is perfectly reasonable, but its empirical use is often complicated by a multiplicity of approaches and accounting elements that, although valid, make the final result much more sensitive to small changes in these elements.

Contributions made by Catalonia and expenditure in its favour 1986-2010, money flow

Origin of the fiscal deficit of Catalonia:

  • Catalonia contributes, on average, 19.2% of the revenue of the Spanish Administration, including the Social Security Administration
  • Catalonia receives, on average, 17.1% of the expenditure of the Spanish Administration, including the Social Security Administration

Contributions of Catalonia and expenditure in its favour 1986-2010, money flow and Social Security excluded

If we exclude inter-personal redistribution by means of rights acquired on an individual basis (Social Security plus unemployment benefit):

  • Catalonia contributed 19.7% of the revenue of the Spanish Administration
  • Catalonia received 11.2% of the expenditure of the Spanish Administration

The imbalance between the contribution made by Catalonia and the expenditure made by the Spanish government in its favour (8.5 pp) is increasing.

This difference is equivalent to over 40% of the tax levied:

For every euro contributed by Catalonia, 43 cents did not return in the form of expenditure in its favour.

During the period 1986-2009, Catalonia suffered, on average, an annual fiscal deficit of 8% of the Catalan GNP (money flow, neutralised).

Specifically, in 2010, the fiscal deficit for Catalonia (according to the money flow method) was equivalent to 16,543 million euros, 8.5% of the Catalan GNP.

On 29 March 2011, the Spanish Congress approved a motion urging the Spanish government to update the fiscal balances of the 17 Autonomous Communities and to publish them in November 2011. Up to now, they have still not been published.

The Parliament of Catalonia is preparing a bill that will make it compulsory to update the fiscal balances every year.

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