Barcelona, February 7. Pedro Sánchez meets with Catalan businessmen at the headquarters of Work Promotion, where they demand more investments for Catalonia and less tax pressure. And in this context, the president of Labor Promotion, Josep Sánchez Llibre, asked the president to abolish the wealth tax and harmonize the taxation of autonomies to “avoid tax havens within the Spanish State.” The business leader has uncovered with it the box of thunder and has faced directly with Madrid, with CEIM, the organization chaired by Miguel Garrido. «You cannot ask for taxes to be raised on others. That lower taxes to Catalonia is good for everyone, but increasing in Madrid would mean a fall in the competitiveness of companies, activity and employment. It would not be good for Spain, ”he told ABC.
This same week Sánchez Llibre said that “the differences (between Madrid and Catalonia) are increasingly important and abysmal and can have very negative economic consequences for Catalonia.” He argued with several examples: “We Catalans pay 10.38% more income tax than the citizen of Madrid”; «The Catalans pay Patrimony tax, the locals do not»; «When the Catalans pay rent and heritage, we pay 40% more than the citizens of Madrid»; «In patrimonial transmissions we pay 55% more than in Madrid»; «We pay inheritance and donations, the people of Madrid, not», and «in documented legal acts, 233% more». To this are added, the President of Development continued, taxes that affect business activity, such as the increase in the tourist rate, the tax on empty homes, that of sugary drinks and the tax on CO2.
In the intentions of the Government is to end the fiscal freedom that Madrid has. The messages in this regard have been repeated by several members of the Executive. The president, Pedro Sánchez, maintains that it is necessary to promote a harmonization of the payment of taxes in Spain and to end tax “dumping” like that of Madrid that, in his opinion, opens a “hole” and influences the depopulation of other territories.
The Executive says that the Community of Madrid has the lowest taxation because it can afford it because of the “capital effect” and the fact that the main corporations are installed in this region. An arguable argument considering that of the twelve years in which the Socialists ruled in Madrid, in ten of them, that is, in 83.3% of the years of their mandate, the Community of Madrid grew less than Catalonia and , in many occasions, that the whole of Spain. The will of the Government exists, but the chances of its intentions thriving are minimal. It would be the first case in which a competition would be reversed, it should be taken to Parliament, change an organic law and it would need an absolute majority. As is the distribution of forces, the possibility of moving forward would be remote.
The pull of the region
Today, after 25 years in the hands of PP governments, Madrid is undoubtedly the Spanish region that has applied the most liberal and least interventionist policies of the entire national geography. And the people of Madrid are also the Spanish citizens who pay less taxes. The combination of these economic policies has placed Madrid at the forefront of economic growth and national wealth. Cutting tax freedom would put the growth of the economic locomotive in Spain at risk.
The Madrid economy is placed year after year in the top of the regional growth rankings and has the highest GDP in Spain. In the absence of knowing the official growth data, BBVA Research points out that Madrid closed 2019 with a 2.6% growth, the largest in the country, compared to 2% of the Spanish economy.
The pull in employment reflects growth. The end of 2019 was much more positive than expected and in that surprise the Madrid employment played a predominant role. At the end of the year, of the 402,000 new jobs, more than a third were created in Madrid. If only the last quarter of the year is taken into account, it accounted for no less than 85% of the new jobs earned in Spain –78,400 of the estimated 92,600–. Its unemployment rate is below 10%, compared to almost 14% on average in Spain.
Total freedom of schedules
Key in this pull of the activity has been its liberalizing policies. With the approval in 2012 of the law of revitalization of commercial activity, Madrid entrepreneurs are free to open their establishments every day of the week at the time they want. It is the only community in Spain that allows total freedom of business hours. In addition, unlike other regional governments, it has eliminated bureaucracy to open new businesses and no second licenses are required to open large stores, as does, for example, Catalonia.
Activity and employment have been favored by low taxes. The various governments of the PP have taken advantage of the assignments of powers over some taxes, such as personal income tax, to reduce rates and introduce new deductions. The maximum rate of personal income tax paid in Madrid is 43.5%, compared to the state rate of 45%. But the difference is much greater if we compare what happens in communities such as Valencian and Catalan, where not only have not reduced state rates, but have risen.
In contrast to what happens in other autonomous communities, there is no Patrimony tax in Madrid and there is an exemption in the inheritance tax of 99% in inheritances from parents to children. The PSOE and Unidos Podemos have also proposed setting minimums in all autonomies at the state level.
This low taxation and the ease of opening new businesses have made the Community of Madrid the most attractive in Spain when attracting investments. For years, Madrid and Catalonia disputed the leadership of this ranking, but after the outbreak of the «procés» Madrid occupies the first position month after month. .