The Catalan Tax Authority: a step forward

The Catalan government has announced 186 new vacancies in the Catalan Tax Office (ATC, in Catalan), as well as a budget increase of 25 per cent. This is, without a doubt, a step in the right direction because it means that this government body will receive the necessary resources to fulfill the duties laid out for it in Catalonia’s current Charter.

It is a proven fact that for any decentralised system to work efficiently, the central government must transfer the decision-making powers and spending management, as well as the capacity to allocate and manage the resources needed to fund any devolved powers. This is how governments are held accountable by the public and how the people are able to assess government policy. It is as simple as comparing the services offered by any administration versus the tax revenue allocated to them. That is why all administrations must be fully visible both in terms of expenditure and income. Unlike with local governments, where taxpayers are well aware of what taxes are levied by their local council, Spain’s regional administrations are not very perceptible from a fiscal point of view (except in the Basque Country and Navarre). This can be explained by the very low level of fiscal accountability they have been granted by the central government, both in terms of legislative capacity and management.

As a matter of fact, Catalonia’s Generalitat is only allowed to manage the taxes that it chooses to create (its so-called “own taxes”), as well as the low-yield taxes ceded by the central Spanish government: net worth tax, inheritance, property and donation tax, stamp duty and gambling tax. Combined, they account for only 5 per cent of all tax revenue levied in Catalonia. We must remember that the Generalitat is also funded through other taxes, such as a percentage of VAT, income tax, special taxes, electricity and motor vehicle taxes, among others, but without any actual power to manage them. Rather, it is the Spanish Central Tax Office (AEAT, in Spanish) who is responsible for collecting, inspecting and managing those taxes. This aspect definitely merits an in-depth review. It does not make much sense for an administration to be in charge of collecting a given tax while it is denied the capacity to modify or manage it. We are faced with a lack of fiscal autonomy, low fiscal responsibility and high reliance on Madrid: even though the Generalitat is entitled to some tax revenue, the fact that the AEAT is in charge means that the Catalan government’s resources inevitably depend on staggered advance payments from Madrid.

To give you an idea of how small the Catalan Tax Authority is, we only need to compare the number of staff it employs (a meagre 325) to the nearly 4,000 employees working in Catalonia for Spain’s AEAT, or in the provincial tax collection offices, which employ close to 1,080 people in Catalonia.

Another important point is the Catalan Tax Office’s low profile, with only four branches in Catalonia (one per province capital), with several of its tax management activities being outsourced to Spain’s civil service or to the AEAT itself. For instance, some of Catalonia’s taxes are handled by Spanish Land Registry officials through an agreement that is renewed periodically. All debt collection for taxes ceded by Madrid is managed by the AEAT via a similar agreement. In order to exercise the few taxation powers that the Generalitat has nowadays, the Catalan Tax Office should at least handle these matters itself.

Having said that, we need to make the most of the new momentum to go even further and re-think what kind of tax authority we want for Catalonia. We have a chance to build an Office that is both modern and efficacious, in line with new international trends in tax management, where the notion of control and persecution of noncompliance are being replaced by the notion of service and cooperation with taxpayers, whilst still tackling tax evasion.