Gov Accountability

Ranking tax competitiveness of Spain's different regions prompts immediate response


Madrid-based Fundación para el Avance de la Libertad, or Fundalib (Foundation for the Advancement of Liberty), has published its Regional Tax Competitiveness Index (IACF) ranking all of the Spain’s seventeen regions’ tax competitiveness. This index, completed with the help of Spain’s Taxpayers Union (Unión de Contribuyentes), has received tremendous amounts of positive attention, picking up coverage in over 70 news outlets and encouraging individuals and businesses to push for better taxation policies within their regions. The release has even encouraged the province of Guipúzcoa to reintroduce a tax shield for its citizens to regain its competitiveness. This will benefit over 700,000 people living there.

Cover of Spain’s Regional Tax Competitiveness Index (IACF) 2017

The IACF compares the rates of 6 different types of taxes that are collected throughout Spain’s many regions. These include income tax, wealth tax, inheritance tax, property taxes, gas taxes, and other region-specific taxes. The score each region receives is a measure of how attractive that region is from both an individual and business perspective.

“We believe that this Index is a powerful tool to inverse the current trend towards more regional taxation.” said Roxana Nicula, president of Fundalib, “It is efficient in showing how a region compares with their neighbors and the rest of the country in attracting businesses and professionals through moderate taxation.”

The release of the first annual IACF has shaken up the political atmosphere in Spain, drawing attention to the vast differences in tax competitiveness – up to 24 percent – from region to region. “We have opened a small Pandora’s Box, and we are looking forward to keeping it open,” continued Nicula.

The IACF’s launch and press conferences were covered by most of the top national and regional media organizations, appearing in over seventy outlets. The index was particularly well covered by regional media, each of them highlighting the good or bad marks obtained by their regions. Many of them featured Fundalib’s graphs or even created their own data visualizations. To increase its impact, Fundalib also distributed their findings to nearly a thousand important stakeholders, including members of regional legislatures and the national parliament, employer and worker associations, and journalists specifically covering taxation.

The three Basque provinces of Vizcaya, Álava and Guipúzcoa lead the ranking while Madrid, even without a special tax system, manages to climb to the top. Catalonia and two other regions do not manage to pass the 5 point threshold.

The ranking system of the IACF has added substantial transparency to the tax situation in Spain, with all citizens now able to see clearly where their regions stand. This competitive layout has encouraged Spaniards to push their elected officials to improve their tax score relative to other regions. An example of this impact can be seen in Guipúzcoa, which has the lowest tax score of the three Basque provinces. In this region, political pressure brought upon by IACF pushed the provincial president of Guipúzcoa to reintroduce a “tax shield” – the prior removal of which the study proved to be the cause of the region’s poor performance. Fundalib plans to publish a second edition of the IACF in 2018.

Read the full Regional Tax Competitiveness Index (IACF) (Link in Spanish)

Fundación para el Avance de la Libertad is a recipient of Atlas Networks’s Liberating Enterprise to Advance Prosperity grant, which offers support to think tanks outside of North America with ambitious and achievable plans to improve the public policy and regulatory environment in their countries, particularly in relation to limits on enterprise and entrepreneurship as measured in the Doing Business Index.