The government will leverage the Patrimonio tax, which taxes an individual's net worth, to ease tensions with Catalonia. In the Tax and Financial Policy Council, which will bring together the executive and regional governments, Cristóbal Montoro is going to propose that regional governments start collecting revenues from the Patrimonio, which was put on hold between 2008 and 2010. This reform will give struggling regions back-door access to the funds that they need.
This is the case for Catalonia and Andalusia. The two regions will get half of the tax revenues. According to 2012 data, Montoro's proposal will pump 300 million euros into Catalonia, and it will receive another 700 million from the Regional Government Liquidity Fund (known by the acronym FLA in Spanish). The government sees this budget boon as the first step toward creating a dialogue and reducing political tensions with the Catalonian government.
However, the executive and the regional governments have different motives. Talks in the heart of the Tax Policy Council promise to be intense, to say the least. Madrid is openly opposed to reinstating a tax that has been eliminated throughout Europe. Certainly it is true that whatever it stops collecting -- for having the tax credit at 100% -- it will recuperate.
Madrid is lowering taxes while other regions raise them, and this trend-bucking policy is attracting taxpayers to the region. Ultimately, reviving old taxes is not a solution but a patch. We need a core plan that fulfills the country's objective financial needs instead of pandering to partisan political interests.
