The State-Generalitat financing agreement leaves the ordinality and collection of personal income tax in 2026 up in the air.
ERC says the pact "sounds good" to it, but it needs "less drama and more concreteness."
BarcelonaThe State and the Generalitat (Catalan Government) are committed to implementing the new financing model agreed upon between the PSC (Spanish Socialist Workers' Party) and ERC (Spanish Republican Party) to inaugurate Salvador Illa. The Bilateral Commission formalized this Monday the agreement reached a year ago by the Socialists and Republicans for the Catalan Treasury to collect all taxes and pay a solidarity contribution to the State. This system, however, will be applicable to the rest of the autonomous communities that request it. The model will have to be approved by the Fiscal and Financial Policy Council and also by the Congress of Deputies. Below, we detail the "principles" of the new model, still without figures and in which the State does not commit to one of the principles that should govern it, ordinality, nor does it guarantee that the Catalan Treasury will collect personal income tax in 2026. ERC has already warned that, although the agreement "sounds good" to it, "It needs less drama and much more concreteness," said Republican spokesperson Isaac Albert at a press conference. "There will be no more agreements if agreements are not fulfilled," he insisted regarding the Catalan and Spanish budgets.
Ordinality
One of the key points of the investiture agreement was respect for ordinality. This means that, when it comes to distributing resources, Catalonia should not drop in the ranking of autonomous regions based on its contributions. For example, if it were the second-largest contributor, it should also be the second-largest recipient. Both the PSC and ERC have defended this principle without reservation, but have encountered resistance from the PSOE.
Finally, this principle does not appear in the points of the agreement signed bilaterally; it is only mentioned in the preamble to the pact. It argues that the new financing must contemplate that Catalonia "contribute in solidarity" in the form of resources to the rest of the State, and it adds: "Catalonia considers that this contribution must be calculated, transparently, with objective criteria, and it is a necessary condition that its application does not distort the principle of ordinality in the final result." That is, the State does not assume the commitment to guarantee ordinality, but rather places it as one of the requests made by the Generalitat.
The "basket of taxes"
Unlike the current model, the goal is for the Catalan Treasury to collect all taxes and then transfer them to the State. How much? This is what will be defined by the "basket of taxes," which will determine Catalonia's contribution to state spending, and which will be calculated using "objective and verifiable criteria," although these criteria are not specified. For example, the Generalitat currently receives 50% of personal income tax, which the State transfers to it through advance payments once the Spanish Treasury has collected it. Under the new model, it would be the Generalitat that would collect all personal income tax, and then it would have to determine what percentage stays here and what goes to the State. With this change in model, therefore, the advance payment system would be eliminated and we would move to updated transfers.
Solidarity
Once this distribution has been made through the tax basket, the solidarity share that Catalonia should contribute to the rest of the autonomous communities will be calculated. This share, according to the ERC and PSC, should be limited by the principle of ordinality, but which for now has not been reflected in the agreement between the two governments. In other words, the "new paradigm" agreed upon by the Republicans for the investiture of Salvador Illa, while awaiting the PSOE, should imply that the Catalan Tax Agency (ATC) should manage taxes and, from there, finance the Generalitat and also a solidarity share to contribute to the common fund.
Singularity
The PSC and ERC agreed that the new model would be "unique." However, this does not mean that it would be a single funding model for Catalonia, but rather that it would be applicable to all autonomous communities. What does this uniqueness entail? The agreement is being made so that the powers of each autonomous community are taken into account when calculating the distribution of resources.
This means that, in the case of Catalonia, the model would include "additional funding" that would be used to pay for its "unique" powers, such as those of the Mossos d'Esquadra (Catalan police) and the Catalan penitentiary system.
Income tax collection
The other pillar of the model is that the ATC will collect taxes. However, this requires the amendment of at least three laws: the Organic Law on the Financing of the Autonomous Communities (LOFCA), the Law on the Financing of the Common System of the Autonomous Communities, and the Law on the Transfer of Taxes to Catalonia. These laws will require the endorsement of Pedro Sánchez's parliamentary partners, some of whom, such as Compromís, are reluctant. To try to make progress on resizing the ATC—taking into account that an agreement on the entire model may take a while—the Socialists and Republicans are working on an initial reform of the three laws solely to enable the ATC to collect personal income tax and other taxes.
This law is precisely what has stalled talks with ERC in recent days. If there is no agreement with the Socialists this month, ERC will present its own. bill in Congress while continuing negotiations with the PSOE. The Republicans assume that there must be "coordination" with the state Tax Agency, but they do not want the ATC to have a subordinate position. The agreement between the two executives establishes that the ATC will assume management responsibilities "within a network model" that must include the participation of the Spanish Treasury, and they commit to establishing a working group to implement this shared management.
Without a 2026 horizon
The investiture agreement established that by 2026, the Catalan Treasury would be responsible for collecting all personal income tax. This was an issue that the Minister of Economy, Alícia Romero, was still committed to until a few weeks ago, but which the Catalan government itself is now ruling out due to the lack of ATC personnel—it currently has about 850 officers, and they would be needed. between 1,000 and 1,500– and also because it won't be technically ready yet. In the agreement, in fact, this commitment is already up in the air, as it states: "Both administrations undertake to analyze the conventional and, where appropriate, legal coverage necessary so that, throughout 2026, and with the prior agreement of the Joint Committee on Economic and Fiscal Affairs and without prejudice to its extension to the rest of the autonomous communities, the 2025 Personal Income Tax returns can be filed with the Catalan Tax Agency."
Against tax dumping
The new model also provides for "expanding regulatory capacity in tax matters," always within the limits of European legislation, with the aim of introducing "additional mechanisms to limit downward tax competition." This message is aimed at countering Madrid's tax dumping, which the government has long complained about.
