Geoscience Reference
In-Depth Information
TABLE 7.5.
The Income Tax and the Evolution of Fiscal Decentralization
(1993-2009)
Main Changes to Income Tax in
Connection with Regional Financing
Period
Political Context
1993-1996
Socialist Minority Government
Support by Catalan Nationalists
needed in Madrid
ACs keep a 15% share of the
income tax paid by their residents.
Note, though, that ACs
do not
have
the capacity to legislate about the
income tax in their territories.
1996-2000
Conservative Minority Government
Support by Catalan and Basque
nationalists needed in Madrid
1997-2001 System
- For the first time, there are two
income tax tariffs, the national
one that applies to 85%of
income, and the regional one, that
applies to 15% of income in the
region. The AC tariff must have
the same number of brackets as
the national one. Also, ACs can
manipulate the tax deductions
applicable to this 15%.
- In addition, ACs continue to keep
15% of the overall income tax
paid by their residents.
- Importantly, Andalucia,
Extremadura, and
Castilla-la-Mancha opt out of the
new system and continue to
operate under the pre-1997
framework.
2000-2002
Conservative Majority Government
Exacerbation of tension between
Basque Parties (PNV) and
Catalan (CIU, ERC) Nationalist
Parties and the Conservative
Government.
Attempt to harmonize and close the
system through bi-partisan
agreement:
- Full Decentralization of Health
Policy
- Need to increase regional
financial
Autonomy
- Increase in the overall
contribution to the system of
regional financing by the central
government
2002 Reform
The number of ceded taxes
increases (VAT, 35%; Special
taxes, 40%).
The share of the income tax on
which the ACs' tariffs apply
increases to 33%.
Increase in the number of
deductions available to ACs in
their share (including deductions
for first residence)
Increase of regulatory freedom in
other ceded taxes such as
inheritance and donation taxes,
wealth taxes, gambling taxes.*
(
continued
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