Catalonia's frustrated dream: To tax and spend like Basques

SPAIN'S refusal to extend the tax-and-spend privileges enjoyed by the wealthy Basque region, which collects its own taxes and spends the money as it pleases, has fuelled the rise of separatism in Catalonia, experts and commentators say.

"Why the Basques and not the Catalans?" asked Catalan daily La Vanguardia recently.

Most of Spain's regions pay taxes to the central government and then receive a portion in return to spend on health, education and public infrastructure.

The sole exceptions are the northern Basque Country and its twin region Navarre which collect their own taxes and decide for themselves how to spend the money.

The two regions, which have Spain's highest gross domestic product (GDP) per capital after the Madrid region, contribute a minimal amount to the central government, mainly for defence, and pay little to an interregional solidarity fund.

They are also reimbursed part of the value-added tax collected on their home turf.

As a result, "public spending in the Basque Country is double the average of the rest of Spain. It's an unbearable inequality and it is not unrelated to the Catalan problem," said Alain Cuenca, an expert on regional financing at the University of Zaragoza.

The issue has fuelled separatist sentiment in Catalonia in the run-up to a contested independence referendum in the northeastern region slated for Oct 1, but which Madrid has vowed to stop.

'Feeling of injustice'

The Basque Country's fiscal privileges were granted during the 19th century, then partially abolished during General Francisco Franco's 1939-75 dictatorship, and finally restored in Spain's 1978 democratic constitution.

The decision to re-establish the privileges was taken in large part due to the pressure created by the deadly attacks carried out by the Basque separatist group ETA, which was very active at the time, experts said.

"There is a feeling of injustice on the part of many Catalans" when they look at the Basque region's advantages, said political science professor Joan Botella of Barcelona's Autonomous University.

In addition, the Basque regional government regularly refuses to pay what it owes to Madrid without any real sanctions, Cuenca said.

"For example, they must pay for military planes, and when they disagree (with the sum demanded), they don't," he said.

Fiscal deficit

Catalonia, on the other hand, pays more in taxes to the central government each year than it gets back in investment and services, although the two sides disagree over the precise figure.

The Catalonia regional government puts this "fiscal deficit" at around 16 billion euros (RM79.7 billion) per year, while Madrid estimates it at around 10 billion euros.

The fiscal problem "has not been the only reason for the independence movement, but was a very important one," said Botella.

The issue was thrust to the centre stage of Catalan politics after conservative nationalist Artur Mas became president of the region in 2010.

He swiftly proposed a new fiscal agreement for the region similar to the Basque model.

Faced with a refusal by Spain's Prime minister Mariano Rajoy, Mas in 2013 called early elections in Catalonia, which he won after campaigning on a promise to hold an independence referendum.

Until then, calls for a vote on secession had been limited to the more radical fringes of the separatist movement.

'Go bankrupt'

Frustration played a "very significant" role in the rise of the strength of the independence movement, but is not the only factor, said Caroline Gray, an expert on Spanish independence movements at Britain's Aston University.

"It goes beyond the financial aspect in the sense that it is not just wanting more money for Catalonia, it is wanting the right to decide over these type of things. It is not just a financial issue, it is about control and authority," she added.

Thanks to their fiscal autonomy, Basques have a relationship with Madrid "that no political force in Catalonia could ever establish with the Spanish government," the current president of Catalonia, Carles Puigdemont, said earlier this month.

But analysts said it would be difficult for Catalonia to get the same deal as the Basques, because it accounts for a far greater share of Spain's economy – about 20% – than the Basque Country, which accounts for just six percent.

"If we did the same thing with Catalonia, Spain would go bankrupt," said Cuenca.

The question is trickier now that Rajoy heads a minority government, which relies on the five votes of Nationalist Basque Party (PNV) in parliament to pass legislation.

Botella said that when the "smoke clears" from the contested referendum, "the fiscal question will be one of the keys to the solution". — AFP