Tax-friendly
THE EURO ZONE ·
Andalucía is attempting to poise itself as a rich-friendly region, where the country's highest earners will want to spend their moneyMark Nayler
Friday, 23 September 2022, 14:49
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THE EURO ZONE ·
Andalucía is attempting to poise itself as a rich-friendly region, where the country's highest earners will want to spend their moneyMark Nayler
Friday, 23 September 2022, 14:49
In scrapping wealth tax, Andalucía's Popular Party (PP) president Juanma Moreno ensures that the southerly region becomes one of Spain's mini tax havens (if you have assets worth over 700,000 euros, that is). All the country's autonomous regions have the power to exercise fiscal independence in this way but, so far, Madrid and Andalucía - both of which are under centre-right administrations - are the only ones to do so. Hopefully, other PP-led regions will now follow suit.
Andalucía wants to position itself as more investment-friendly, less punitive to the wealthy and a good place to own property and do business - all of which would benefit a region consistently named as one of the poorest in Europe. Spain's Socialist-led coalition government, though, isn't happy with Moreno's surprise declaration of autonomy.
In a radio interview this week, minister for social security José Luis Escrivá called Moreno's tax reductions "totally regressive", adding that it was "absurd" to have regions competing with each other to attract big earners. But he failed to detail any aspects of Spain's largely devolved approach to taxation - especially wealth taxation - that are, in his opinion, ineffective or unfair.
Much like Roe v Wade in America was indirectly about the morality of abortion and primarily about federal power versus state autonomy, Moreno's latest move only secondarily concerns taxation (although if high earners pour into Andalucía, the region's coffers could be swelled substantially). This is really about where key elements of fiscal power should reside: with the national government or with regional administrations - as, to a large extent, they already do in Spain.
Escrivá favours greater fiscal centralisation. He cites the Australian model of collection and disbursement, in which the country's six federated states are as it were rewarded by the central government for effective public spending. But if that model works on the assumption that regions can manage their public spending effectively, why shouldn't they be able to set tax rates and collect their own revenues effectively, too?
Escrivá also claimed that, instead of competing with each other to lure wealthy residents, Spain's regions should concentrate on "improving health, education and dependency services". That's surely easier to do, though, if your annual income tax take is bigger, as Moreno hopes it will be as a result of cutting wealth tax.
In any case, statements about WHERE tax revenues should be directed don't entail conclusions about WHAT KIND of government is best-placed to channel them there. Why is a central government necessarily more equipped or able than a regional administration to improve public services? There's no good reason why Andalucía can't improve vital services at the same time as abolishing wealth tax. Escrivá sees necessary connections and mutual inconsistencies where there aren't any.
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