The Government adds €2.168 billion more despite not having a budget

BarcelonaThe Salvador Illa government continues to seek alternatives to provide itself with more resources without having a budget for 2025, which has been extended for the last two years. For now, tomorrow, the Executive Council will approve a supplementary credit of €2,167.7 million, which will be used to guarantee the operation of public services and cover personnel expenses not currently included in the accounts. This was announced this Monday at a press conference by the Minister of Economy of the Generalitat (Catalan Government), Alicia Romero, who argued that this is "good news so that the system, despite lacking resources, can operate normally."

This additional injection of money would bring the budget up to date by December 31, 2024, but more resources would still be needed to compensate for the lack of new budgets. The Department of Economy estimates that they will need to incorporate around €1.7 billion more to meet this year's commitments and be able to deploy multi-year programs for which there are currently no resources. Even so, these additional credits will also have to be approved by the Catalan Parliament, and here Isla will once again have to overcome the difficult political balance of his minority government. "The country has many needs, and with resources in the bank, we must be able to incorporate them," Romero argued.

The regional minister also announced two other decrees that will be approved this Tuesday that incorporate tax changes. The most significant aspect is the agreement with the Republican Left (ERC) to lower the regional income tax bracket for annual incomes up to €33,000. This measure will especially benefit taxpayers with incomes up to €12,500 per year: those in the lowest bracket will go from paying a rate of 10.5% to 9.5%. Romero stated that 63% of taxpayers will notice this tax reduction. This change also simplifies the rest of the income tax bracket, reducing it from nine to eight brackets.

With this initiative, Salvador Illa's government is reviving a measure planned for the ERC government's last budget: an agreement was reached with the PSC (Spanish Socialist Workers' Party) and was not approved due to opposition from the Commons (Comuns) to endorse the draft accounts. To give a practical example, the Department of Economy has explained how the measure will affect, depending on their salary, a person who receives only earned income, is single, under 65 years old, and has no children. For someone with an annual salary of €25,000, this will mean a reduction of €103 in contributions per year, while someone earning €30,000 will pay €78 less.

Tax measures for housing

In the area of personal income tax (IRPF), new deductions will also be approved, focusing primarily on access to housing for young people, the unemployed, widows and widowers, people with disabilities, and victims of domestic violence. The age limit for this tax deduction for the rent of a primary residence will rise from 32 to 35, totaling 16,183 beneficiaries. The maximum deduction a person can claim as a tenant will increase from €300 to €500 and may be as high as €1,000 for joint tax filers, large families, and single-parent families. The income limit will also increase from €20,000 to €30,000, equivalent to a gross salary of between €35,000 and €40,000.

How the ARA progressed, the Government has also agreed with the Commons on a new deduction of up to 20% on capital contributions to establish an agricultural or housing cooperative, with a maximum limit of 3,000 euros. Furthermore, the deductions for fostering minors in a family will be equated with those already received in the case of birth and adoption: 150 euros in the individual return and 300 euros in the joint return.

This same decree law will modify the property transfer tax (ITP), the rate paid on the purchase of a second-hand home. Thus, the age for young people who can benefit from the reduced rate of 5% on the purchase of a primary residence is raised from 32 to 35 years of age, where until now they had to contribute 10%. The reduced rate will also be applied to victims of domestic violence. Romero has confirmed that the tax will be approved. Other measures agreed with the Commons to combat property speculation Such as the creation of a new tax rate of 12% for apartments valued between €900,000 and €1.5 million, and 13% for those valued over €1.5 million. "Those who buy a more expensive home can contribute more to the general public," Romero emphasized.

In addition, a 20% rate has been set for the Property Transfer Tax (ITP) on property purchases by large property owners. Those who purchase an entire building will also pay 20%, but there will be three exceptions: if the buyer is an individual, if the property has a maximum of four floors, and if the floors are used as the primary residence of the person acquiring it or their family members. In the case of non-profit housing cooperatives, the ITP (Property Transfer Tax) will be 100% discounted, while the discount will be 50% for those who purchase office buildings or unfinished buildings intended for subsidized housing, and for those who convert the property into a company's headquarters or workplace.

The third tax that will change is the Stamp Duty (AJD), which taxes public deeds and other documents that must be signed before a notary to purchase a home. Among other changes, the most notable is that this rate will be 100% reduced for young people up to 35 years of age when the purchase of a primary residence is subject to VAT, a situation that applies to new construction developments.

Tourist tax and personal loans from the ICF

Romero also announced that the executive council will push through another measure agreed upon with the Comuns (Commons), which has provoked outright rejection from hoteliers: Catalonia will double the tourist tax. From now on, payment of this tax will go from €1.20 to €7 per person per night. City councils will be able to add a surcharge of up to €4 per night, which in the case of Barcelona can be increased to €8. Twenty-five percent of this revenue collected by the Generalitat (Catalan Government) will be allocated to housing policies. The remainder will be used to promote tourism. "Since the tax was created in 2012, the tourism sector has not stopped growing. We have more visitors each year who spend more in Catalonia, and therefore, we believe it is essential that those who visit can also contribute to supporting the needs of the region," Romero stated.

Finally, this package of fiscal and administrative measures includes an unprecedented change to the operation of the Catalan Institute of Finance (ICF). From now on, this public body will be able to provide loans to individuals, especially in the area of social housing, at a time when the government is looking to update the limited public housing stock. Loans will also be open to citizens in areas such as sustainability and environmental protection.