The Ministry of Treasury has sent the draft of the new funding system to the autonomous communities, which foresees an increase of €20.975 billion (47% more) and raises the IRPF allocation from 50% to 55%.
The Ministry of Treasury has taken a key step to reform the autonomous funding system. This Friday, it sent a letter to all autonomous communities with the draft of the new model, which includes an increase of €20.975 billion compared to the current system, representing a 47% increase. The proposal, led by Minister Arcadi España, will be debated in the Fiscal and Financial Policy Council scheduled for July 29.
If everything follows the planned schedule, the new system would come into effect in 2027. Before that, the draft will go through the Council of Ministers after the summer and then to the Congress of Deputies for parliamentary processing. The aim is for the autonomous communities to have more resources to finance public services such as healthcare, education, and dependency.
47% more resources and higher IRPF and VAT allocations
The Treasury's proposal contemplates that the autonomous communities will receive around €224.5 billion with the new model, compared to €152.484 billion in 2023, the base year for calculating funding needs. The increase is €20.975 billion, a 47% increase compared to the current system.
Additionally, the Government proposes to raise the IRPF allocation percentage from 50% to 55%, and the VAT from 50% to 56.5%. This means that the autonomous communities will manage a larger share of the revenues from these taxes, giving them greater financial autonomy. The measure aims to reduce the differences in funding per adjusted inhabitant between communities by 50%, according to the ministry's estimates.
Another relevant change is the reformulation of the adjusted population, which will now include variables such as the protected population in 20 groups (compared to the current seven) and new criteria to better reflect the cost of services. This will allow for a more equitable distribution of funds, taking into account factors such as geographical dispersion, insularity, or fixed costs.
New criteria in education, social services, and unemployment
The draft also introduces changes in the calculation of educational spending. It will take into account the number of inhabitants aged 18 to 24 who are pursuing university studies or vocational training, as well as university students who move from other communities. This acknowledges the effort of regions that host students from outside.
In social services, the elderly population is broken down into two age groups: 65 to 79 years and over 80 years, with different weightings. Additionally, for the first time, the number of unemployed individuals without social benefits is included, with a weight of 1.5% in the calculation of needs. This indicator aims to compensate communities with higher long-term unemployment.
Other elements impacting the cost of services include area, dispersion, insularity, and fixed costs. This recognizes the difficulties faced by communities with low populations or complex geography in achieving economies of scale.
Shared fund for IRPF and new taxes in the autonomous basket
In tax matters, the proposal includes a novelty: communities that wish to do so may opt for a shared fund system, where IRPF revenues will arrive simultaneously to both the central and autonomous administrations. Each territory will communicate its voluntary adherence.
Moreover, the wealth tax, the tax on bank deposits, the gaming tax, and the landfill waste tax are incorporated into the basket of taxes in the system. These taxes were not previously part of the funding model, which broadens the base of autonomous resources.
For the interested reader, the reform will represent a change in the capacity of communities to manage their revenues and expenditures. Regions with larger populations or greater educational and social needs will be the most benefited. The deadline for implementation is 2027, but the legislative process will begin in the coming months. Citizens can expect an improvement in the provision of public services if the model is applied, although the political debate will be intense.
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