“Of the 20 taxpayers who paid the most taxes for assets, half moved outside of Andalusia. His departure meant a loss of 3.5 million euros due to Wealth Tax and a loss of 14 million euros in Personal Income Tax”. With the exodus of that ten citizens, the president of the Junta de Andalucía, Juan Manuel Moreno, justified last Monday his decision to abolish that tax figure, starting a fiscal war, not with the Community of Madrid, in whose mirror he looks without hesitation the Andalusian popular leader, but with other communities such as Catalonia or the Basque Country.
The Board recognizes – this was done this Tuesday by the Minister of Economy and Finance, Carolina Spain – that they are not aware that the main reason for the “flight” of those 10 taxpayers was the obligation to have to pay taxes on their assets, nor of that have been transferred to the Community of Madrid or to other countries where this tax is not paid —because the Tax Agency does not offer the nominal relationship of the origin or destination of the taxpayers—. If you argue, however, that the 100% wealth tax bonus affects few citizens —18,900 (0.2% of Andalusians) with an average wealth of 2.7 million euros and who paid a fee of 5,000 euros―, hardly has any specific weight in the total amount of collection —95 million, 0.6%―, but which, in return, will attract several thousand taxpayers with high incomes, who will pay personal income tax, and who will avoid the flight of top managers from Andalusia.
The Ministry of Economy and Finance also does not specify how many new taxpayers it hopes to seduce or in what amount the regional coffers will benefit from the increase in income tax collection that it predicts, but its technicians have calculated that if 7,200 citizens moved their tax domicile, it would be compensated with your income statement what is left to enter by equity. The Board is clear about who wants them to settle in Andalusia: high-income earners who live abroad (United Kingdom, Portugal or Morocco) who usually spend long periods on the Costa del Sol, but who, they maintain, do not decide to set their habitual residence in the community so as not to have to declare assets or real estate that they own outside our borders. Moreno this week has also explicitly addressed the Catalans.
The mantra less taxes, more revenue
Since he joined the Junta de Andalucía and with the successive tax cuts applied in the previous legislature, Moreno has defended that the lower tax pressure —after the 100% discount on inheritance and donation tax and the reduction of the regional sections of the Personal income tax― has resulted in an increase in taxpayers —280,000 more― and in higher collections —more than 800 million only for personal income tax in 2020, which would amount to 1,100 million if the rest of the taxes are included―. The Andalusian president seems determined to demonstrate that his community is the empirical example that the Laffer curve is no longer just a theory.
From its Ministry of Economy and Finance it is recognized, however, that they do not have “certain data” that prove that the rise in taxpayers has a direct and main relationship with the change in taxation, but they appeal to the “theory of large numbers ” which is, according to sources close to that department, “with which tax policies are made”. And they provide figures: Of the 280,000, in the highest income brackets, between 6,000 and 120,000 and in more than 120,000, taxpayers increased by 14% and 13.7%, respectively, compared to 2018. An increase that it is attributed to the suppression of the Inheritance tax, the same reason for which the rise in that period in 547 people who paid for Patrimony is argued.
The increase in taxpayers has been generalized in this period in all the communities of Spain, not only in those that have applied tax reductions, due to the incorporation of more citizens into the labor market. “Employment has increased and, therefore, collection,” says Francisco Ferraro, president of the Economic Observatory of Andalusia. Even before the arrival of Moreno there were improvements in employment. In 2018, when the PSOE was still governing with another taxation model, the number of taxpayers grew by 138,332 people, a figure higher than that of 2019, when 126,470 more were added, and the PP was already on the Board.
Regarding the parallelism between the increase in taxpayers and natural growth, the Board finds an explanation appealing to “the stability and legal certainty of Andalusia in relation to other autonomous communities with more insecurity”, according to the sources consulted, echoing the Moreno’s invitation to the Catalans to settle in Andalusia, because “we are never going to become independent here”.
In Andalusia there is a current that affirms that there are massive population movements throughout the Spanish territory in search of the most favorable economic regime. An idea that spread in the times of the socialist president Susana Díaz, when the Andalusian PP campaigned claiming that there was an alleged fiscal exodus of 40,000 Andalusians who emigrated to Madrid each year. Some figures that are fictitious because the year with the most departures from Andalusia to Madrid was 2017 when 12,655 Andalusians left for the capital region and the data does not include the reverse flow of 7,471 Madrilenians who moved to the southern region. In 2019 there were more Andalusians who went to Madrid than the taxpayers of that capital who settled in Andalusia. In 2020, although the balance was favorable for this community —9,906 arrivals compared to 8,119 departures—, most experts explain this flow due to the teleworkers who settled on the Costa del Sol during the pandemic, a fact that turned Malaga into the most populous province that year.
“The abolition of the inheritance tax could be an incentive for high-level professionals who had already moved to work in places in Andalusia with a good climate, to stay permanently,” says José María O’Kean, professor of Applied Economics and professor at the Pablo Olavide University and at the IE Business School. “When, in addition to taxing your assets, income and successions are taxed, this discourages those who may have a second residence in that territory from establishing themselves definitively,” adds Stella Raventós, president of the Spanish Association of Tax Advisors (AEDAF), who It is clear that the total reduction of the wealth tax, “in addition to being political”, is intended to “attract high-income middle classes who are creating wealth.”
There are other factors that determine the change of residence beyond the merely tax. Retirement, telecommuting or the characteristics of the destination, such as the weather or family members, are the main reasons for moving, the experts consulted agree. “Nobody moves from an autonomous community due to taxation, unless they are very rich,” says an official from the Tax Agency who prefers not to give his name. “The incentive to move from Madrid to Andalusia due to the reduction in the regional section of personal income tax does not seem very plausible as the main reason either, because the deductions continue to be greater in the Madrid community than in Andalusia,” he abounds.
The Board has pointed to the exodus of 10 taxpayers as a scapegoat to abolish the Wealth Tax, and calls for waiting a year to check with the collection data and increase in taxpayers who calculate that the measure does not favor a few, but benefits to the majority of Andalusians. While waiting to see if the abolition of the wealth tax is effective, what has become clear is that it has achieved its effect: reopening the fiscal battle between the communities.
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