Municipalities join the war of autonomous communities and Treasury on account of the monthly payment pending VAT of 2017. The President of the Spanish Federation of Municipalities (FEMP) and socialist mayor of Vigo, Abel Caballero, announced this morning that he is already working to claim “Today” to the Ministry of Finance on reimbursement of 753 million euros corresponding to the VAT settlement of one month of the year 2017.
The Supreme Court ruled this week in favor of Castilla y León, which would have appealed that it did not receive the corresponding monthly payment, which sets a precedent for the rest of the territorial administrations. Now the Treasury must find a solution to pay the autonomies about 2,500 million euros, to which are added the 753 of the municipalities. Catalonia, Galicia, Madrid, Castilla-La Mancha, Asturias, Andalusia or Murcia, had also presented similar appeals and now they see that the Supreme Court’s ruling gives the green light to their claims.
The problem stems from a measure adopted in 2017 the Ministry of Finance that was then commanded by Cristóbal Montoro. By approving the computerized VAT return (the Immediate Information System, to modernize the tax return), the taxation date for companies was delayed to allow them to adapt to the new system, which caused that in that year, for cash purposes , only eleven months will be collected.
As the communities receive 50% of the income from the tax, and the large municipalities and capitals receive 2.3266% of the income from the tax, in 2017 the State covered the part of regions and consistories, but the financing model indicates that two years from now the Executive will settle the differences in the real collection versus the expected distribution of income. In 2019, the liquidation arrived and left the communities with 2,500 million less income as a result of this 2017 decision. The municipalities, for their part, had a negative liquidation of 489.5 million when, including this amount, they should have received 263 , 9 million from the Treasury.
the State collected ten months of income of collection in 2017, compared to twelve in regions and municipalities. In 2019, the State, when making the settlement of 2017, was left with 13 months of collection of the tax -one of them the result of that of 2017 of less than it received- and Autonomous Communities and municipalities, with eleven. The Treasury, at the time, included a solution in its 2019 Budget project, but when the Congress of Deputies overthrew them and the elections were brought forward, it was left on paper. Then, already in 2020, it softened the deficit targets and allowed the regions to compensate for this loss of income with loans from the Autonomous Liquidity Fund (FLA) at zero rate.
In the case of local corporations, The Treasury discounted what was not received by VAT in the spending rule –That is, the limit of growth of public spending– for last year, going from 2.8% to 2.9%, and leaving them more sleeve to spend. He also offered a ‘extra FLA’ for the most indebted municipalities.