Geoscience Reference
In-Depth Information
As a result, excluding the Basque Country and Navarra, the fiscal arrange-
ments at work transfer large amounts of income and resources towards the less
developed regions of Spain, as depicted in
Figures 7.2
and
7.3
. Quite unsur-
prisingly, the nationalist parties in relatively wealthier regions demand political
protection of asymmetries and economic protection of their tax bases. Due to
its harmonizing character, the Second Autonomous Agreements, contrary to
their original goals, resulted in further polarization.
The Partial Achievement of Fiscal Autonomy
Interestingly,
Table 7.4
captures a number of changes over time in the compo-
sition of regional revenues, giving a measure of the relative success of some ACs
in pursuing fiscal autonomy. In 1996, regions are allowed to keep 15%ofthe
income tax collected within their boundaries. By 2001, in addition, they had the
freedom to adjust some of the parameters of the income tax for another 15%
of income. And by 2002, the regional component of the income tax accounts
for over 16% of regional revenues, whereas the share of direct transfers from
the central government has dropped to 47%. Finally, the very recent reform
of December 2009 implies additional steps in this direction, as it increases
the share of ceded taxes to the ACs, and reduces the scope of direct intergov-
ernmental transfers. These figures capture a process of fiscal decentralization
whose political underpinnings date back to 1993.
The 1993 general elections results opened a new stage in the development
of fiscal decentralization in Spain. The elections of 1993 and 1996 yielded
minority governments (see
Table 7.2
). Neither the socialists (PSOE) in 1993
nor the conservatives (PP) in 1996 achieved enough seats to rule on their own.
This prompted significant changes in the scenario of relations between central
and nationalist state governments. Catalan (CiU) and/or Basque nationalists'
(PNV) support was now a precondition for a stable executive in Madrid.
As a result, the case against higher levels of harmonization was now much
stronger politically. Higher bilateral pressures and demands for fiscal autonomy
fared better after two terms (1986-1989 and 1989-1993) in which nationalist
demands were constrained by unified Socialist Party majority governments. The
evolution of Spanish fiscal federal arrangements captures this process.
Table
7.5
describes in detail these reforms to the territorial allocation of different
Income Tax sources along with the key changes in the surrounding political
conditions. Counterfactually, it is hard to think of any of those reforms being
implemented under the political conditions prior to 1993.
18
The key stages in
Table 7.5
illuminate the changing interplay between
demands for higher levels of fiscal autonomy (and therefore a reduction in
the scope of redistribution) and the nature of the system of representation. The
changes in 1993 and 1997 are directly explained by the loss of a sufficient
18
Ruiz-Huerta and L opez Laborda (
1996
: 582-614) present an excellent review of the major
issues associated with the implementation of these reforms.
