April 22, 2021

The Treasury will make the objective of the deficit of the communities more flexible to 0.2% this year


MADRID

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The Treasury will soften the deficit path to the autonomous communities so that this year its objective is -0.2% of GDP, compared to the budget balance goal that was in effect. This is what sources of the Treasury transfer to ABC, which indicate that Minister María Jesús Montero will offer the regions a path that will consist of -0.1% of GDP in 2021 and 0% in 2022 and 2023.

The Fiscal and Financial Policy Council that will begin at 4:30 pm will foreseeably approve these new goals, since the Ministry has half of the votes of the Council, so with the support of a single region or autonomous city, the The path of stability goals will go ahead. The Government itself had already announced that it would soften the path and that was included in the proposal document that yesterday President Pedro Sánchez delivered to the Government of Quim Torra.

Until now, the path of stability that was in force was that approved by the Government of Mariano Rajoy, which consisted of the 2020 joint deficit reaching -0.5% of GDP, with the regions having a budget balance. The Pedro Sánchez Executive tried twice to approve the deficit targets that contained a joint imbalance of 1.8% in 2019 (0.5% for the regions), 1.1% in 2020 (being 0.1 % for communities) and 0.4% in 2021 (and balance to autonomy).

However, the Congress of Deputies first, in July 2018, and the Senate later, in December, knocked down this path. Now the Government is aware that the deficit in 2019 will have exceeded its forecast of 2% of GDP, so by 2020 it contemplated a forecast in the budget program of 1.7% (not counting on the approval of budgets). The Autonomous Communities had an imbalance of 0.25% of GDP last year until November. The Fiscal Authority predicted that they would have closed the year with a lag of 0.5% of GDP.

The autonomous communities on a war footing for VAT

The worsening of the imbalances in the regions is due to the 2.5 billion less income they have had for having a less monthly collection of VAT, in addition to the increase in spending in election year. Precisely the Treasury will face some communities on a war footing for this monthly VAT, which has caused Catalonia, Madrid, Andalusia, Galicia, Murcia Y Castilla la Mancha (the latter with a socialist government) have brought Justice to the Ministry. Other regions of the PSOE like Aragon, Balearics Y Asturias they have also threatened with it to the point that Javier Lambán has given the Government a fifteen-day ultimatum or else he will denounce.

Faced with this rebellion, Montero has indicated that it is “a rock for threats” and has thrown in the face of the PP communities that their party rejected the 2019 Budgets, which solved this mess. However, the minister also dropped that she studied “palliative measures” that she will not reveal until this afternoon, before the counselors.

2017 issue

Although VAT is not on the Council’s agenda, Madrid He has asked to incorporate it and, whatever happens, the communities will raise it at the meeting with the Treasury. The problem derives from a measure adopted in 2017 by the Ministry of Finance that was then commanded by Cristóbal Montoro. When approving the computerized declaration of VAT (the Immediate Information System), 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 were collected.

As the communities receive 50% of the income from the tax, in 2017 the State covered the part of the communities, but the financing model indicates that after two years the Executive sees the differences against the distribution of expected revenues that the Central Government distribute In 2019, the liquidation came and left the communities with 2.5 billion of revenue less fruit of this 2017 decision.

In this way, the State collected 10 months of revenue from cash collection in 2017, compared to twelve of the communities. In 2019, the State when making the liquidation of 2017, was left with 13 months of collection of the tax – one of them as a result of the 2017 less than it received – and the communities, with eleven.

In terms of accrual, which is the one that is taken into account for the deficit and national accounting, this effect leaves regions with more deficits in 2019 and the State, with less due to the greater and lesser resources respectively, although in In total, it has no impact on the deficit of all administrations, since what the regions lose is won by the Central Government. These 2.5 billion are equivalent to two tenths of GDP of greater or lesser imbalance. Therefore, some regions such as Andalusia They ask to soften the fiscal objectives of the 2019 regions to include the consequences of this situation.

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