Madrid underpaid Generalitat by €1.4 bn in 2014

The difference between the estimated amount that the Generalitat was due to receive form Madrid from tax revenues levied in Catalonia last year and the actual amount transferred was €1.4 billion.

Spain’s Finance Minister, Cristóbal Montoro, miscalculated the tax revenue collected for 2014, which led to an astronomical difference --more than it costs annually to fund the Mossos d’Esquadra (Catalonia’s police force), for example. As a result, Madrid will have to return this money to Catalonia next year with the final settlement for 2014, as stated by Catalan Finance Minister Andreu Mas-Colell before he attended the meeting of the Council on Tax and Financial Policy. The financing model in place provides that the settlement is to be paid two years after the close of the year in question.

If the State had calculated the revenues correctly and had not withheld these monies from the Generalitat, the 2014 deficit would have been 0.7 per cent lower. To be precise, the fiscal gap of the Catalan administration would have been 1.88%, still far from the 1.0% limit imposed by the Spanish Treasury for that year, but it would have reduced the excess of deficit by almost half, from 2.58%.

The 1.4 billion euros that will be received in 2016 is some 1.2 billion more than was paid for the settlement of 2013 this year. This indicates that, in a year of fiscal strictures, Madrid held back millions in transfers to the regional governments so as to present a more favorable financial situation. In fact, this money represents, in practice, a two-year interest-free loan from the regions to the Spanish central government, even though it will serve next year to alleviate the deteriorated finances of the Generalitat.