Our Foral Treasuries,
part of our historical identity

Background

The origin of “tax exemption”

One of the most characteristic components of the classic “foral” (“chartered regime”) system is the fact that taxes are handled differently in each of the foral territories.  Said foral territories, in turn, all maintain, a separation from the system in force in the non-foral territories.

We will focus on the system in force in the Señorío de Bizkaia (“Seignory of Biscay”), whose tax scheme was quite different from that applied in the territories of the Crown of Castile, especially when compared with the territories of Araba and Gipuzkoa.  John I himself, Seignior of Biscay from 1371 and King of Castile from 1379, declared that Biscay should not pay for any loans, duties, or any other taxes “because it never had done so” – naturally, this was with the exclusion of the income owed to the region’s Seignior in his condition as such. In Chapter IV of the Old Foral Structure Law of 1452, the exact substance of the Biscay pedido, or “donation”, is detailed; that is, the amounts that had to be paid to the Seignior.

The origin of “tax exemption”
One of the most characteristic components of the classic “foral” (“chartered regime”) system is the fact that taxes are handled differently in each of the foral territories. Said foral territories, in turn, all maintain, a separation from the system in force in the non-foral territories.
We will focus on the system in force in the Señorío de Bizkaia (“Seignory of Biscay”), whose tax scheme was quite different from that applied in the territories of the Crown of Castile, especially when compared with the territories of Araba and Gipuzkoa. John I himself, Seignior of Biscay from 1371 and King of Castile from 1379, declared that Biscay should not pay for any loans, duties, or any other taxes “because it never had done so” – naturally, this was with the exclusion of the income owed to the region’s Seignior in his condition as such. In Chapter IV of the Old Foral Structure Law of 1452, the exact substance of the Biscay pedido, or “donation”, is detailed; that is, the amounts that had to be paid to the Seignior.

Subsequently, in Law IV of Title I of the New Foral Structure Law of Biscay (1526), the taxes to be paid by the people of Biscay to their Seignior were listed, establishing the following: “é otro pedido, ni Tributo, ni Alcavala, ni Moneda, ni Martiniega, ni Derechos de Puerto seco, ni Servicios, nunca lo tuvieron: Antes todos los dichos Vizcaynos, Hijos-Dalgo de Vizcaya, y Encartaciones, y Durangueses, siempre lo fueron, é son libres, y essentos, quitos é franqueados de todo Pedido, Servicio, Moneda, é AIcavala, é de otra qualquiera imposicion que sea, ó ser pueda, assi, estando en Vizcaya, y Encartaciones, é Durango, como fuera de ella” (“…they never had any other type of donation, or tax, or duty, or service fee: all those from Biscay, Encartaciones, and Durango have always been free and exempt from taxes, donations, and other frees of a fiscal nature whether they are in Biscay, Encartaciones, and Durango or not”). This is the legal precept on which the origin of the so-called “tax exemption” is based.

It was clear that the Seignior could not demand the payment of any other tax not included in the New Fuero Law; however, some other taxes were also paid, for instance, in order to fund institutions like the Juntas Generales (representative assemblies). Each village paid the corresponding taxes by collecting the amount due from the neighbours so as to pay for any necessary expenses; i.e., the maintenance of roads or the organization of supplies in case of emergency.

Moreover, there was the ecclesiastical tax, or diezmo, which was collected by either the clergy or by the outstanding laymen in the Church. Nobility also collected their own taxes for the use of their properties; i.e., mills or bridges. Even the “Consulate of Bilbao”, association of traders (which was established in 1511) collected its own tax: rights for damages.

Besides the abovementioned, in Biscay and upon the demand of the Seignior, a gift or voluntary payment could be paid, becoming compulsory in many cases. It was used in order to finance part of the great expenses of the Spanish Monarchy during the 16th, 17th and 18th centuries.

The First Common Tax for Biscay

The Seignory of Biscay, in order to obtain enough income to cover its expenses, divided the payment of the total amount of the expenses proportionally among the neighbours of each village, who were included in the census by home or “fireplace”, this is the reason why the system was called fogueraciones (related to the word “fireplace” in Spanish). This system was finally blessed by the Agreement of 1630, in which it was prohibited to set fixed taxes on the prices of “food, drink, and other necessities”. When the King unilaterally decided to increase his revenue by implementing the so-called estancos tax, the social revolts or matxinadas began. A remarkable example of these revolts is the big riot, known as the matxinada de la sal, which took place in Bilbao in 1631 as a result of the King trying to implement a tax on salt.

However and in spite of the strong opposition, in March 1640 the need for revenue forced the implementation of the first common tax (or Arbitrio) in Biscay, which was 8 maravedies per quintal of iron. As for how this duty was to be collected by the Seignory, the system applied was the one laid down in the New Fuero, which allowed the villages to collect it. This required a majority of two thirds in the Juntas Generales and a request to the Crown for the final approval. Once these requirements were met, the duty was collected in the Seignory.

From 1640 onwards, it is known that there were specific economic management positions in Biscay: the Treasurer of the Seignory and the General Accountant of the Seignory. The King’s representative in Biscay, the Corregidor, also had an important role in tax administration because he was the one to authorise the proportional quotas and the payments.

Tolls and taxes. From the “fogueraciones” to the “cajas” system

This simple initial scheme was getting more and more complex, particularly during the 18th century, due not only to the increase of new donations for the Crown but also to the increase of the army´s expenses, which were to be covered by the Deputations. In addition, from the middle of the 18th century onwards, the Deputations started carrying out a new activity consisting of constructing roads. The first road constructed by the Deputation (with the participation of the Consulate and City Council of Bilbao) was the road between Bilbao and Pancorbo (via Orduña), where the connection was made with the main road to Madrid. It was opened in 1771. The works required a great funding effort and, even though the Deputation had to pay only a third of the expenses, new income had to be obtained in order to finance it. The solution was to collect a toll whenever wagons, carts or horses passed by.

Thus, duties were gradually consolidated as the main system of financing the Institutions of the Seigniory. In 1804, the collection of the fogueraciones stopped, as they were no longer a good financing source. Thus, new and higher duties, (arbitrios), together with the toll roads, were the only revenue of the treasury of the Seigniory

As duties were increasing, the “cajas” or “boxes” system was being developed. This is to say, each duty was collected at the exact amount needed to defray a particular expense. Since then, one can distinguish the “General Box”; the “War Box” (“Exercito”) or “Army Box”, founded in 1793, first to save voluntary donations made by individuals and then several compulsory duties, for instance the 6 percent duty on income from trade activities and on income from property, which provided enough funds to guarantee the money borrowed from individuals; the “Tobacco Box”, from 1794, which contained the revenue from the duty on Tobacco; the “Road Box”, which contained the duty on Wine; and the “Donations Box”, which contained the duties on sugar, on cinnamon, on cocoa and on cod. Thus, as taxes gradually expanded, so did the “cajas” or “boxes”.

It was in 1802 when all these sources of income were centralized in the Treasury of the Seigniory, although the Boxes continued working until the beginning of 19th century. In fact, the more duties they implemented, the more Boxes they opened. Collection was carried out by public employees of the Seigniory or through a rental scheme. The Tobacco Box was the only one whose duty was collected directly by a public employee of the Deputation: the Consultor.

First attempts to standardize and expand the tax system

This special situation of the Seignory of Biscay, together with the so-called sister provinces of Alava and Gipuzkoa, began to suffer from difficulties during the 18th century.

From the time when Bourbon King Philip V took the Spanish throne, the Nueva Planta Decrees abolished the ancient fueros of almost all the areas that were formerly part of the Crown of Aragon and, therefore, the Basque territories were at that moment in an exceptional situation. In spite of attempts to establish uniformity in customs (dictated in 1718 and annulled in 1720), which brought about a new matxinada, as well as attempts by the royal authority to intervene more directly in the operation of local institutions, it can be stated that during the majority of the 19th century the structure of the three Basque provinces continued on without much difficulty.
From 1794 to 1801 there was a big expansion of the tax system of the Seigniory: the implementation of new direct and indirect taxes and the creation of three new Boxes: War, Tobacco and Donations. The expenses were not only higher but there was also greater diversity. The “services to the King” or Donations gave way to investments in coastal defence, cannons, munitions, employees for the Deputations (this in the 18th century was about 40 people), and new jobs were increased (thanks to the tax reform).

The social and economic crisis which took place at the end of the century caused greater uncertainty and poverty to the extent that expenses on social welfare and on public order increased and the “Partida Volante” (origin of the Regional Police Force) was founded, along with the subsequent founding of the Miqueletes and Miñones.

The beginning of serious problems dated from the end of the War of the Convention (1793-1895), during which the troops sent by the General Deputations didn’t perform well. The participation of the troops and other issues concerning the war were an extraordinary economic effort for the Treasury of the Seigniory.

This effort was increased as a result of the subsequent wars: the Independence War (1808-1812), the conflictive implementation of a constitutional regime during the three-year liberal period (1820-1823) and –even more intensely– during the First Carlist War.

The Carlist Wars and the Foral Abolition

Serious difficulties arose when the absolutist monarchy was successfully taken over in 1833 by the constitutional monarchy with Isabel II. At that time, when the Spanish nation-state was under a construction process surrounded by problems, the coexistence between a constitutional regime, based on the principle of equality before the law, and the Fuero and the specificity it involved was of great difficulty.

The first Carlist War (1833-1839) was a dynastic war during which the Fuero was an element of mobilization. The war ended with the Bergara Convention signed by the Carlist General Maroto and the Liberal General Espartero, who was committed to finding a solution to the issue of fueros for the government. The result was the Law of October 25th 1839, which made the political and legal principles of the Basque foral system that was in effect until that time constitutional in the Spanish national context, noting that there should be a future hearing in which the Deputations participate so as to reform the regime to align with the general interests of the nation.
Once the Foral Deputations were re-established, taxation was their main particularity. In 1841, several features of the foral tradition were abolished after a failed uprising against Espartero, which the Basque Deputations supported. As a consequence, inland customs was moved to the seaside. This particular system had been based on inland customs posts mainly located in cities bordering the plateau of Castile (Balmaseda, Vitoria, Orduña), instead of customs posts located at harbours and borders with foreign countries. Thus, goods imported into the Basque Country did not pay import duties until they were carried into Castile. These inland customs posts, known as the Ebro belt, were in operation with ups and downs during the Modern Era. The final integration of the Basque Country within the national market took place by Decree in October 1841.

Another institution which was abolished was the veto of the Basque Representative Assemblies or pase foral, which implied that all decisions made by the King or the government had to be endorsed by the foral authorities and were only observed if they were not violating the Fueros. The particularities concerning the establishment of City Councils were also revoked, as the need to organize municipalities according to the general law was imposed. The judicial competences of the local and foral entities was transferred to the corresponding Instance Courts, (Audiencias). The liberal state and its administrative organization of municipalities and courts was not in line with the traditional foral system.

However, the Foral Deputations, the General Assemblies, the donations and the peculiar Tax on Tobacco kept being in force: restored after Espartero’s defeat. For instance, in 1845 the Spanish State Treasury was deeply reformed, the so-called Mon-Santillan reform, which established the basic pillars for the tax system up to 1977. Despite this, in Biscay the reform had a limited impact as most of the taxes established by the reform were not collected. In fact, the only income the State was obtaining came from donations, customs levies, duties on mortgages and personal bonds.