Budgets and fiscal dumping

Measures must be taken against Madrid's "tax haven", which benefits from the "capital effect"

The ERC spokesman in Madrid, Gabriel Rufián, announced yesterday a preliminary agreement with the PSOE to give the green light to the State budget which includes four points: the end of the control of the expenditure of the Generalitat (approved by Rajoy to prevent the referendum), the extension of the moratorium on Social Security contributions for the self-employed, the payment of an outstanding debt on grants from the Ministry of Education to Catalonia and the creation of a working group on taxation which, among other things, will have to study mechanisms to prevent the fiscal dumping practised by the Madrid region.

This last point has provoked the PP to come out in a flurry against the pro-independence party, which it accuses of wanting to harm Madrid with a "recentralising" policy, since the way to prevent this fiscal dumping is a priori to harmonise some taxes setting some limits so that the Madrid region cannot eliminate them de facto. It is true that it is paradoxical that pro-independence forces defend limiting the fiscal autonomy of the Madrid region, but it is even more true that Madrid takes advantage of the benefits of the "capital effect" (all the resources coming from the State that it concentrates by the mere fact of acting as capital) to compete unfairly with the rest of the territories through taxes.

However, we will have to negotiate the small print of this principle of agreement without harming ourselves in terms of competences and within the framework of a rational fiscal policy aligned with Europe. ERC will have to ensure that both this point and the others are met as concretely as possible. With Ciudadanos increasingly left out of the equation, the Catalan pro-independence parties must bring their weight to bear to ensure that resources reach Catalonia to tackle the economic crisis, just as the PNV does with the Basque Country. We will have to be vigilant, for example, to the percentage of investment in infrastructure, which in the current project stands at 16.5%, when the weight of Catalonia's GDP in Spain as a whole is close to 19%.

With yesterday's gesture, which is expected to be ratified by the Republican government, ERC has completed its pragmatic turnaround and has reinforced its commitment to becoming a preferential partner of the PSOE-UP government with a two-fold objective: on the one hand, to obtain resources for Catalonia, and on the other, to provide stability to the only Spanish government that is theoretically willing to explore the path of dialogue. The context of the pandemic, which has highlighted management and the need to inject public resources into the economy to avoid collapse, favours the Republican strategy.

On the other hand, it is also positive that Pedro Sanchez has finally decided to use the same bloc to pass the budget as he did for the investiture. This is the only bloc that can guarantee stability, and thus Sánchez moves away from a possible understanding with Cs. We will have to be vigilant, however, because experience shows that Sánchez only moves when he is forced to. The first step must be to approve budgets, which are essential for implementing the economic reconstruction plan. And the second will be to return to the table for dialogue on the Catalan conflict.

EDICIÓ PAPER 16/01/2021

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