Tax dumping reduces regional revenues by 3.7 billion euros.

Tax cuts in most autonomous communities led to a decrease in revenue of 3.678 billion in 2023. It was an election year, and the various governments that approved tax reductions significantly increased this decrease, as they had forgone revenue of 2.201 billion in 2022. The figures are included in the report "The 2023 Settlement of the Financing System of the Common Regime Autonomous Communities," published yesterday by the Foundation for Applied Economic Studies (Fedea) and signed by Ángel de la Fuente. The document also concludes that Madrid, Catalonia, and the Balearic Islands were the only territories that contributed resources to the financing system that year.

Of the fifteen autonomous communities with a common tax system, thirteen lost revenue by exercising their regulatory powers and reducing the rates of certain taxes. The result is a map in which, for the same taxable event, such as income tax, inheritance tax, or gift tax, citizens pay different rates depending on the territory in which they reside.

The only two regions that did not lose revenue in 2023 due to tax decisions were the Balearic Islands, which collected €379 million, and Catalonia, with a margin of €56 million. However, Catalonia is the region where the most taxes are paid, either because it has higher rates or because it has a greater number of its own taxes in force. The Registry of Tax Advisory Economists (REAF) estimates that the Generalitat (Catalan Government) collected €922 million in 2024 from its own taxes: water fees, large commercial establishments, tourism, vacant housing, packaged sugary drinks, and so on, up to fifteen million during the last fiscal year. There are none in Madrid.

Among the thirteen autonomous regions that lost revenue in 2023 due to regulatory decisions, Madrid stands out, with a loss of €1.415 billion. The majority of this loss, around €1 billion, is explained by personal income tax rebates. The president of the Generalitat (Catalan government), Salvador Illa, stated a few days ago that it would be necessary to "put a stop to this unfair competition and tax dumping in Madrid." Following Madrid is Andalusia, with €938 million less revenue, followed by Galicia and Aragon, with losses of €366 million and €328 million respectively. Among the territories governed by the PSOE (Spanish Socialist Workers' Party), Castilla-La Mancha lost €136 million and Asturias saw a loss of €94 million, according to Fedea calculations.

Thirteen communities lowered rates, which generated notable differences for the same taxable event.

However, having a higher tax burden does not mean collecting more. In this regard, and despite the tax cuts, Madrid collects more than Catalonia. According to the same Fedea report, Madrid collected more than €30 billion in 2023, while Catalonia achieved €28.8 billion in revenue. This difference is explained by the fact that Madrid's GDP exceeds that of Catalonia, notes Ángel de la Fuente.

Another conclusion of the Fedea study affects the resources that the autonomous communities made available to the financing system, which has been the subject of political controversy in recent days. Only three regions were net contributors in 2023: Madrid, which allocated €7.975 billion, 75.2% of the total; Catalonia, which contributed €2.266 billion, 21.4%; and the Balearic Islands, with €358 million, 3.4%.