Public Finance of the Autonomous Regions of Spain. Reflections and Proposals for Reform

In this paper it is argued that the present fiscal imbalance in the finance of the autonomous communities can be remedied only by consideration of a number of principles of financial structure—in particular, sufficiency and solidarity. This leads to a proposal for reform which is based on (1) the fixing, as a percentage of GDP, of a global sum of revenue required for each level of government; (2) allowing autonomous tax-rate setting of ceded taxes; and (3) the introduction of a reformed block-grant, based on a percentage of GDP and distributed to regions on the basis of required revenue (this emphasises need and resource equalisation). The proposals are intended as a complete model in which minimal change from existing procedures is required.