For years Spanish regional governments hardly rose or lowered taxes. And they did not make preparations for a judicial framework that would allow them to make changes to increase tax revenues, but starting this year a new financing system gave them the ability to create their own taxes and complement transfers from the national government tax system.
Use of this tool has been ramped up during the crisis. Since 2010, the regional governments have created 40 new taxes. Of this number, 33 were applied in fiscal years 2012 and 2013. Castile y Leon, Cantabria and Madrid have relied on the tool the least while Andalusia and Catalonia have used it the most.
The crisis has definitely led officials to create more taxes. The demands of meeting ever stricter budget goals have forced them to increase revenues where possible in order to sidestep spending cuts. These cuts have started in the healthcare and education systems, but overall administrative structures remain more or less the same as they were before the crisis began.
The state has threatened the regions by saying it will reduce the number of public companies and organizations, but these threats have yielded little action from the regions. Perhaps because the national government has not provided a good example, failing to meet its own budget goals.
Regional government elections will take place in 2015. With these elections on the horizon, we are likely to see a new wave of tax cuts. If that happens, then we should keep in mind that government tax strategies are changing to win votes, not to create lasting structural change.