# Proposals for change - financing of the autonomous regions



## Lynn R (Feb 21, 2014)

It's good to see there is some serious thinking going on about reforming the system of financing the autonomous regions, with a view to eliminating the substantial differences between regions in some types of taxes. I hope whichever Party comes to power after the November elections will keep this issue high on their agenda.

El caos fiscal que enfrenta a España | Economía | EL PAÃ�S


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## Alcalaina (Aug 6, 2010)

Lynn R said:


> It's good to see there is some serious thinking going on about reforming the system of financing the autonomous regions, with a view to eliminating the substantial differences between regions in some types of taxes. I hope whichever Party comes to power after the November elections will keep this issue high on their agenda.
> 
> El caos fiscal que enfrenta a España | Economía | EL PAÃ�S


There's no doubt the current arrangements are a mess, but what should replace it? Greater funding from the centre would limit the jealously-guarded autonomy of the regions to formulate their own policies. Allowing them to keep a greater share of income tax and IVA generated locally would benefit the wealthier regions to the detriment of the poorer ones.


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## extranjero (Nov 16, 2012)

Can't come too soon for the residents of Murcia!


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## Pesky Wesky (May 10, 2009)

But hasn't the idea of _reforming the system_ been around for a while?
Like years.
Maybe decades????


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## Alcalaina (Aug 6, 2010)

Pesky Wesky said:


> But hasn't the idea of _reforming the system_ been around for a while?
> Like years.
> Maybe decades????


I'm pretty sure it was one of the 2011 election promises from the PP


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## Lynn R (Feb 21, 2014)

Alcalaina said:


> I'm pretty sure it was one of the 2011 election promises from the PP


Probably been too busy counting and hiding their ill-gotten gains.

Maybe pressure from the new Parties snapping at their heels will make a diffference and something will actually get done about this, although I do appreciate lots of noises have been made about it before which have never translated into action.


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## Alcalaina (Aug 6, 2010)

Lynn R said:


> Probably been too busy counting and hiding their ill-gotten gains.
> 
> Maybe pressure from the new Parties snapping at their heels will make a diffference and something will actually get done about this, although I do appreciate lots of noises have been made about it before which have never translated into action.


I think it would be far too difficult, as there would be so much resistance from the regions that would lose out.

One thing they promised that I wish they would crack on with, though, is the rationalisation of all the different levels of local government (comarcas, mancomunidades, ayuntamientos, diputaciónes etc). Each level has a rake of politicos all claiming expenses and pensions, which costs the country a fortune. And it's so inefficient; every little town is collecting its own car tax, for example, and none of the computer databases talk to each other.


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## baldilocks (Mar 7, 2010)

I hope you are going to leave our IHT rates alone. Perhaps it would be better to look at the smaller ACs and do some merging so that they become more efficient units.


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## extranjero (Nov 16, 2012)

baldilocks said:


> I hope you are going to leave our IHT rates alone. Perhaps it would be better to look at the smaller ACs and do some merging so that they become more efficient units.


Yes, when you have generous allowances as in Andalucia, it must be worrying if someone decides to make it fairer for everyone by standardising IHT allowances, or putting them under the state umbrella, thus avoiding the massive differences that make it a post code lottery, one person paying many thousands, another nothing, through no fault of their own.
As I said before, " I'm alright, Jack" springs to mind
I for one, hope there is a massive change in how iht is determined, and if that shakes the smug, self satisfied people who don't want their little world tinkered with, in order to make if fairer for others- tough!


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## baldilocks (Mar 7, 2010)

extranjero said:


> Yes, when you have generous allowances as in Andalucia, it must be worrying if someone decides to make it fairer for everyone by standardising IHT allowances, or putting them under the state umbrella, thus avoiding the massive differences that make it a post code lottery, one person paying many thousands, another nothing, through no fault of their own.
> As I said before, " I'm alright, Jack" springs to mind
> I for one, hope there is a massive change in how iht is determined, and if that shakes the smug, self satisfied people who don't want their little world tinkered with, in order to make if fairer for others- tough!


So you are saying we should have a level playing field that is rougher and worse rather than your AC improving so that you have a decent playing field. It isn't a postcode lottery, it depends on where *you* choose/chose to live.


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## extranjero (Nov 16, 2012)

When I chose to live in Murcia it had a very generous iht allowance, similar to Andalucia and Valencia
This changed in July 2013, when allowances were abolished.
This could have happened to you , so it is not anyone's fault if they choose to live in a region that makes such unexpected devastating decisions.
Yes I would.
prefer a level playing field- if every region abolished allowances, at least it's fairer
The best thing that could happen however, is to take away the power of the regions to determine such an important tax, which should be set by the state at a realistic level, unlike the risible level it is set at now
16 k in Spain 325 k - ludicrous( yes, I know it's on the person in Spain and on the estate in the UK) 
It's still pathetic


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## Alcalaina (Aug 6, 2010)

I think we're forgetting what the A in AC stands for.

No region is going to give up their hard-won autonomy without a fight.


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## extranjero (Nov 16, 2012)

Things like IHT need to be determined by the state, not the whims of the regions!


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## Roy C (Sep 29, 2012)

I don't get it why the state would make the widow or widower pay IHT


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## Pesky Wesky (May 10, 2009)

extranjero said:


> Things like IHT need to be determined by the state, not the whims of the regions!


IHT is not one of the most important areas that need to be determined by the state imo. I'd go for more cohesion in education and health policies first


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## extranjero (Nov 16, 2012)

Roy C said:


> I don't get it why the state would make the widow or widower pay IHT


You and me both!


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## Alcalaina (Aug 6, 2010)

Why stop at the state, why not advocate for these policies to be made by the EU or even the UN?

The point is that we live in a country where the regions are to a greater or lesser extent autonomous (for historical reasons some, like Catalonia and the Basque Country, have more powers than others). This was the price paid during the transition to democracy for keeping Spain as a single nation. The ACs have their own elected parliaments, raise their own taxes and determine their own policies, reflecting the democratic will of their inhabitants. You can't just wish all that away just because you don't want to pay inheritance tax.


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## extranjero (Nov 16, 2012)

No one wants to pay inheritance tax! Spouses certainly shouldn't- it's immoral that they have to.
It's all very well for people in regions where the allowance is generous to go on about this
It's certainly an unjust situation where someone in Murcia may pay thousands on the inheritance, where over the border another pays nothing.
Something has to be done to even out the differences. I thought something was in the pipeline about this.
Cetainly no region should be allowed to just abolish them


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## Alcalaina (Aug 6, 2010)

extranjero said:


> No one wants to pay inheritance tax! Spouses certainly shouldn't- it's immoral that they have to.
> It's all very well for people in regions where the allowance is generous to go on about this
> It's certainly an unjust situation where someone in Murcia may pay thousands on the inheritance, where over the border another pays nothing.
> Something has to be done to even out the differences. I thought something was in the pipeline about this.
> Cetainly no region should be allowed to just abolish them



I personally think inheritance tax is quite a fair tax. If you benefit financially from an inheritance, it is effectively unearned income and should be taxed like any other income. But not on your own home. Are you saying that a spouse in Murcia now has to pay IHT on the family home? At what rate?


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## extranjero (Nov 16, 2012)

Spouses pay iht on the deceased's assets, so that includes half of their jointly owned home.
Inheritance tax is something that should be determined by by central government, to be fair to all, not those lucky enough to live in an area of generous allowances.


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## Chopera (Apr 22, 2013)

Alcalaina said:


> I personally think inheritance tax is quite a fair tax. If you benefit financially from an inheritance, it is effectively unearned income and should be taxed like any other income. But not on your own home. Are you saying that a spouse in Murcia now has to pay IHT on the family home? At what rate?


I might have mentioned it before on here, but if you want a genuine meritocracy then IHT should be 100% and income tax 0%. Unfortunately there'd be a few problems implementing that.


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## baldilocks (Mar 7, 2010)

extranjero said:


> Spouses pay iht on the deceased's assets, so that includes half of their jointly owned home.
> Inheritance tax is something that should be determined by by central government, to be fair to all, not those lucky enough to live in an area of generous allowances.


If you were living, say, in Andalucía, would you feel the same way?


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## Chopera (Apr 22, 2013)

extranjero said:


> No one wants to pay inheritance tax! Spouses certainly shouldn't- it's immoral that they have to.
> It's all very well for people in regions where the allowance is generous to go on about this
> It's certainly an unjust situation where someone in Murcia may pay thousands on the inheritance, where over the border another pays nothing.
> Something has to be done to even out the differences. I thought something was in the pipeline about this.
> Cetainly no region should be allowed to just abolish them


I suspect some regions gain less revenue from income tax than others, due to the demographics of the people who live there. If there are a lot of retired people living in a region then the revenue from income tax might be quite low, so they have to either collect a different tax instead, or depend on (yet more) handouts from other regions with larger workforces. Neither situation is ideal.


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## Alcalaina (Aug 6, 2010)

extranjero said:


> Spouses pay iht on the deceased's assets, so that includes half of their jointly owned home.
> Inheritance tax is something that should be determined by by central government, to be fair to all, not those lucky enough to live in an area of generous allowances.


I'm still confused. This is from the Telegraph last September, and it says spouses and children get a 99% exemption. Have they got it wrong or has it changed since then?



> For example, in *Murcia,* the Balearic Islands, Madrid and Valencia, *up to 99pc of the deceased’s assets can be exempt from succession tax where the beneficiaries are children and/or a spouse.* In Andalusia, up to €175,000 (£138,000) inherited by a spouse or children can be tax-free, and in Catalonia allowances are a maximum of €650,000 (£512,000) for a spouse and €400,000 (£315,000) for a child.
> EU court rules against Spain over discriminatory tax rules - Telegraph


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## smitty5668 (Feb 25, 2015)

i am with extranjero on this one.


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## Lynn R (Feb 21, 2014)

Chopera said:


> I might have mentioned it before on here, but if you want a genuine meritocracy then IHT should be 100% and income tax 0%. Unfortunately there'd be a few problems implementing that.


I'd vote for that!

Might encourage people to spend and thus create more employment too, rather than piling it up in the bank so that somebody else can benefit from it after they're dead.


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## extranjero (Nov 16, 2012)

Alcalaina said:


> I'm still confused. This is from the Telegraph last September, and it says spouses and children get a 99% exemption. Have they got it wrong or has it changed since then?


Class 1 which is for children under 21 get an allowance but spouses belong to class 2 
Spouses have always been liable for iHT on the deceased's assets,
That's what makes this tax so wrong.


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## extranjero (Nov 16, 2012)

baldilocks said:


> If you were living, say, in Andalucía, would you feel the same way?


Wherever I lived I would want allowances to be fair instead of " I'm all right, Jack, b....r everyone else"


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## Roy C (Sep 29, 2012)

So, a question on the topic, If we lived in Andalucia and I popped my clogs would my wife have to pay IHT on the house and any savings or other property in the UK if we had one?

Something we would have to take into consideration, I suppose.


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## Lynn R (Feb 21, 2014)

Roy C said:


> So, a question on the topic, If we lived in Andalucia and I popped my clogs would my wife have to pay IHT on the house and any savings or other property in the UK if we had one?
> 
> Something we would have to take into consideration, I suppose.


See the post above where it says there is a tax free allowance for residents .

Andalucia of €175,000. In addition the principal residence is exempt if the value (and that's the catastral value x the municipal multiplier, not the market value) is below €122,000 but the property must be retained for 10 years following the death or, if it is sold, the IHT becomes payable. The inheritor does not need to live in the house, however.

Yes, any property or savings held in the UK would also be liable to Spanish IHT

Any property or savings held in the UK (or anywhere else outside Spain) do not attract Spanish inheritance tax if they are bequeathed to a beneficiary who is not resident in Spain (to a child, for example).


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