The downward fiscal race applied by almost all the autonomous communities, mainly by those governed by the PP but also by some led by the PSOE, during the months leading up to 2023, an electoral year, will have a negative impact on public income of 2,363 million during this year and the next, according to calculations by the Independent Authority for Fiscal Responsibility (Airef) based on data provided by the different governments. The decrease is due, for the most part, to the successive reductions in personal income tax already executed or planned, with the Community of Madrid being the territory that accumulates the greatest loss in collection.
Four out of every ten euros lost in public revenue due to fiscal measures of the autonomous communities are registered in Madrid, indicates the supervisory body in its "report on the fundamental lines of the budgets of public administrations for 2024." Specifically, the territory chaired by Isabel Díaz Ayuso will stop earning 991 million this year and next, although Airef also highlights a minimal residual impact in 2025 and 2026.
Of those almost 1,000 million lost in collection in the Community of Madrid, 940 million are due to the negative impact of personal income tax, a decrease that occurs after the regional government made a flag of successively reducing the income tax in the autonomous section, what is known as deflation.
The Valencian Community, governed until May by the PSOE and starting with the elections by the PP, is the second autonomous region that will lose the most income due to applying reductions in the income tax brackets. Specifically, it will raise 259 million less. Andalusia, for its part, will lose 255 million due to income tax relief. Catalonia, for its part, is at the bottom of the table, with 19 million less. The Tax Authority estimates that the autonomous communities will stop earning a total of 1,930 million during this year and next, excluding the Basque Country.
Airef explains in the same report that the lower collection of 2,363 million in public income is concentrated in 2023, with an impact on income of 900 million less, and in 2024, when public coffers will lose 1,400 million. “Although there will be additional impacts in 2025 and 2026,” adds the report from the team led by Cristina Herrero.
Another fiscal measure that will reduce public income is the reduction in the Inheritance and Donations tax that some autonomous communities announced during the electoral period. In this section, it is the Valencian Community that leads the collection losses, with 232 million less, followed by Madrid, with 49 million and Andalusia, with 13 million.
Applying or announcing bonuses in the Wealth Tax also has an obvious negative effect on collection. In this way, the reductions applied in Andalusia subtract 108 million from income and those in Galicia, 34 million. Cantabria also enters this section, with 20 million less expected, and Extremadura, which will stop receiving 6 million.
The reductions in the tax on Property Transfers and Documented Legal Acts of Cantabria will subtract, for their part, 18 million from the collection of Cantabria and 9 million from that of Castilla-La Mancha.
“The regulation and weight of tax reforms is different by autonomous community,” explains the report. The Tax Authority highlights that “Catalonia is the only community that has regulated permanent tax reforms that, together, will have a positive impact, although in the Region of Murcia, Navarra and the Valencian Community some permanent tax increase measures offset part of the negative impact. of the Personal Income Tax and Inheritance and Donations reforms.”
In most of the autonomies, permanent tax reduction measures represent a loss of between 0.1% and 0.2% of regional GDP, reaching 0.3% of GDP in Madrid, La Rioja and the Valencia Community; and reaching 0.5% in Cantabria.
