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Decentralization and the fiscal system: A comparative study of experiences

The objective of the Taxes and Competition Foundation (Fundación Impuestos y Competitividad) is to study and investigate the tax system with a view to improving and perfecting it, with a particular emphasis on aspects which impact the competitiveness of the Spanish economy.

It may appear that an analysis of fiscal decentralization which focuses in particular on the situation at regional or autonomous community level falls outside the scope of this objective, is related more to public financing issues. The fact is, however, that whatever the public finance formula established for the funding of the Autonomous Communities, it has an impact on aspects which are purely fiscal, such as, for example, the solutions implemented in relation to the regulatory competence attributed to the Autonomous Communities – powers to partially regulate State taxes or to create local taxes, or the tax administration mechanisms applied – and those implemented for the management and collection of the various taxes which generate the revenues from which autonomous community bodies fund their budgets.

This situation, linked to the repeated calls made by political representatives in recent times for a review of the current system of autonomous community financing in force in Spain – to the point that there is a generalised conviction that this will be one of the basic questions to be addressed in the legislative work to be carried out in the next legislature – led the Foundation’s Board of Trustees to the conclusion that these are questions which need to be addressed. Professors Lago Peñas and Vaquero García, from Vigo University, were therefore commissioned to undertake a study of these matters based on a comparison of the Spanish system and the solutions adopted in it with the regimes in place in third countries, and in particular those of those States which are generally looked upon as models or paradigms of fiscal decentralisation.

The result of this initiative and of the work commissioned is the book entitled “Descentralización y Sistema Tributario: Lecciones de la experiencia comparada” (Decentralization And The Fiscal System: A Comparative Study Of Experiences)”, published by the Fundación Impuestos y Competitividad.

The conclusion reached by Professors Lago and Vaquero is that in countries with a federal government structure – which is what they consider Spain to have – , and leaving aside the nominalistic considerations, local and central questions should make way for regional interests.

Their work sets out to analyse the manner in which the attribution of taxation powers between different levels of government can be resolved from a dual perspective: the solution proposed by theoretical analyses of fiscal federalism, and that arrived at through a comparative study of experiences.

In short, this book sets out to offer a fiscal decentralization map which enables us to understand the context of the Spanish experience and assess it, identifying the difficulties Spain faces and challenges still to be addressed, particularly at regional or autonomous community level. Rather than seeking to provide an incontrovertible solution, it sets out to put matters into perspective, to identify what has worked well or unsatisfactorily in other countries, to determine the aspects in which the Spanish model may be considered conventional and those in which it can be looked upon as exceptional or unusual. In short, it aims to demarcate the area to which the alternatives to be considered in political negotiations and by the legislature should be confined.

The Board of Trustees of the Foundation considers this work – which reflects its commitment to Spanish society insofar as relates to the improvement and perfecting of the Spanish tax system – to be of great interest and hopes that it will provide the different social partners involved in this area with another perspective to be considered in their endeavours to come up with the solutions best suited to the system of financing of Spain’s autonomous communities.