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The Barcelona Institute of Economics presents the third update of the Autonomous Community Financing Map

  • IEB analyses the evolution of the available resources for each autonomous region in the third update to the “Autonomous Community Financing Map

Madrid, the Balearic Islands and Catalonia were the worst affected regions by the current autonomous community financing system from the period 2012-2016 (the latest data available), according to the third update of the Financing Maps published by the Barcelona Institute of Economics (IEB). This tool shows the evolution of the available resources for each territory per capita with the application of the equalization mechanisms and the adjustment funds of the model. In the period under study, the Community of Madrid has tax resources of 2.962 € per citizen (adjusted) per year on average. After the adjustments are applied, the resulting funds of the model ends with a lower-than-average figure of 2.250 €.

In the case of the Balearic Islands, the application of the model means a reduction of 10,6% in the tax revenues per capita during this period. Between 2012 and 2016, the Balearic Community generated an average tax revenue of 2.526 € per capita, and ended with 2.259 € after the transfer of the funds of the model.

Finally, Catalonia, on average, generated tax revenues of 2.478 € per capita during this period, and were left with 2.254 € after the application of the equalization mechanism and the adjustment funds in the system.

For these last four years, the IEB Autonomous Community Financing Map also shows that these three regions are the only ones that have been able to generate tax revenues per capita well above the average among all the regions, and result in lower-than-average resources after the implementation of the mechanisms of the financing system.

A system with “poorly justifiable” results
“The fact that some regions with the most tax capacity per capita end up with lower-than-average volume of resources as a result of the application of the adjustment funds for sufficiency, competitiveness and cooperation, causes distortions in the redistribution and generate these poorly justifiable situations,” according to IEB researcher, Maite Vilalta. The academic, however, considers that the equalization mechanism, known as the guarantee fund of basic public services, “meets the goal of closing the gap between communities with greater and lesser fiscal capacity without altering the original order “.

An example of the arbitrariness in the final resources available caused by the current funding system is the contrasting situation of communities ending up with a similar level of tax resources as before the implementation of the equalization mechanisms and the adjustment funds. For example, the Valencian Community starts with 2.189 € per inhabitant, and ends up with 2.305 € after passing through the system. Asturias is another territory with a similar starting point, with funds of 2.160 € per capita, which then increases to 2.572 € after the adjustments from the model.

Extremadura, La Rioja y Cantabria, regions with the most resources
On the side of the regions that benefit the most, we find Extremadura, which has always generated fewer tax resources than the state average, but which ended up with a volume of resources per capita above this average on account of the current funding system. In particular, the Extremaduran community registered tax resources of 1.463 € per capita on average, which rose up to 2.542 € once the funds of the model were transferred.

The current model particularly favors regions such as Extremadura that ranks third in terms of the total resources available during the five years analyzed, behind La Rioja and Cantabria, which had an average of 2.694 € and 2.916 € per capita respectively, with average increases in resources available of 28.9% and 26.8% during the period due to the system adjustments.

Evaluation and updated analysis of the model
The latest edition of the IEB’s Autonomous Community Financing Map includes the consolidation of a tool that provides a system of evaluation and updated analysis of the current model of autonomous community financing, having been in operation since 2009. Through the different sections of the website, the user can gain knowledge of the entire tax collection norms ceded by the central government to each autonomous community, the resources that result from their participation in the equalization mechanism (guarantee fund of basic public services) and from the model adjustment funds (sufficiency fund, competitiveness fund and cooperation Fund).