Madrid Allocates 25% Of Its Income To Finance Rest Of The Autonomous Communities

Up to 25% of tax revenue earmarks the Community of Madrid to nurture the regional financing fund. In other words, a quarter of the region’s collection goes to the annual distribution and, beyond that, it represents three times the effort made by Catalonia, whose contribution represents 8.75% of registered income.

To these autonomy, the Balearic Islands are added as the only three regions that contribute clearly to this fund, in the case of island autonomy with 11.5% of income, as indicated by Fedea in a report published this Monday on The 2019 liquidation of the financing system of the autonomous communities of common regime .

The author of the document, Ángel de la Fuente, points out that the system provides the communities with the lowest income with extra resources, above their tax revenues for an amount of almost 19,000 million euros. These resources come in part from the State (which contributes some 10,300 million euros in net terms) and in part from the communities with the highest per capita income (Madrid, Catalonia and the Balearic Islands) that contribute another 8,500 million .

Contributions to equalization account for around 10% of regional tax revenue in Catalonia and the Balearic Islands and almost 25% in Madrid. On the side of the host communities, revenues from this route exceed 20% of the homogeneous tax revenues in ten cases and are particularly important in the Canary Islands, where they account for more than half of total revenues.

With all this, the total volume of the final financing of the communities of common regime, measured by homogeneous competences and equal fiscal effort, experienced an increase of 4.6% in relation to 2018 in 2019 , to 113,608 million euros.

However, Fedea estimates a slight decrease in the resources of the regional financing system in line with income estimates that remain “somewhat below pre-pandemic levels.” Specifically, this decrease in the financing package would be 1.76%, which represents a figure slightly higher than 2,000 million euros.

Budget reduction
But to get a clearer idea of ​​the resources provided by the State to the autonomous communities during 2020 and 2021, it is important to take into account not only the regional financing system but also the extraordinary transfers to help defray the expenses generated by the pandemic. and to mitigate the loss of regional tax revenue.

In this sense, Covid funds accounted for around 11.5% of total income from the autonomous financing system and extraordinary transfers in 2020 and 9.9% in 2021.

The distribution by regions of these 18 transfers was quite more unequal by territories in the first year because a good part of the funds were distributed based on indicators of the incidence of Covid, which was very unequal between communities in the first phase of the pandemic. In 2021, however, it was decided to distribute the total endowment of the fund in proportion to the regional adjusted population.

“Although these figures must be interpreted with caution,” between 2018 and 2019 there is an increase of 3.9% in the resources provided, which coincides with the growth in effective financing between 2017 and 2018. In 2020 there is an increase of slightly more than 7%, although tax revenues fell very significantly in that year as a result of the Covid crisis, the Government chose to maintain payments on account based on forecasts prior to the arrival of the crisis , thus protecting the regions of the fall in tax collection. In 2021, the resources contributed by the system are slightly reduced.