The Supreme Court’s rulings on VAT force the Government to mobilize 3,500 million for CCAA and municipalities



The two judgments of the Supreme Court that obliged the State to return to the Junta de Castilla y León and the Xunta de Galicia a part of the VAT settlement of 2017 have caused the Government to have advanced that it will mobilize around 3,500 million euros in the next General State Budgets (PGE) destined to the autonomous communities and local entities to solve this economic damage.

Last July, the Minister of Finance and Public Function, María Jesús Montero, transferred to the autonomous communities in the Council for Fiscal and Financial Policy (CPFF) that the Government will transfer them around 3,000 million euros as a return of the VAT settlement for the year 2017. This would be done, according to the minister, through a budget item in the year 2022.

Now, the Government has reported in a parliamentary response that the Treasury will enable for the year 2022 a budget credit of around 500 million euros destined to local entities as a refund of the VAT settlement of the year 2017.

This authorization will also be included in the PGE bill and the amount of the credit has been quantified based on the impact of the Immediate Supply of VAT Information on the settlement of the participation of local entities in the 2017 State taxes, which is estimated at 466 million euros. In addition, another 30 million euros are included for possible late payment interest accrued.

Thus, in total the Executive will include in the PGE for next year a total of 3,500 million euros after the two judgments of the Supreme Court in favor of Castilla y León and Galicia. The Minister of Finance herself already announced that the VAT of the 17th would be returned to all the CCAA and not only to the communities that won the judicial pulse of the State.

There may still be a controversy with the amount to be returned to the municipalities. The president of the Spanish Federation of Municipalities and Provinces (FEMP), Abel Caballero, pointed out that local entities will also claim from the Treasury the refund of 753 million euros corresponding to the VAT settlement of 2017.

The Finance Commission of the Congress of Deputies approved in early June almost unanimously a non-law proposal urging the Government to compensate all autonomous communities and local entities for the payment of VAT in 2017. The approved text, which is the result of a transaction based on initiatives presented by PDeCAT and PP, was approved by 34 votes in favor, none against and one abstention.

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