The Economic Agreement Arbitration Board, in its decisions of the 1 December, found that the retirement benefits received by a non-resident should be deemed to have been obtained in the Basque Country, when those benefits are from employment mainly taking place in that territory, for the purposes of attributing to one or other authority the competence to apply the system for the optional levying of income tax envisaged for the tax payers residents in the Member States of the European Union in the Non-Resident Income Tax. It thus deems to be applicable an identical criterion to the one subsequently incorporated in Article 22 of the Economic Agreement after the amendment introduced by Act 7/2014, of 21 April.

On the other hand, in its decision of the 2 December, the arbitration board precisely defined the scope of application of the tax management powers to be exercised by each authority. It found that the central government was not empowered to determine, based on the competences of that nature, the volume of operations of an entity subject to the inspection jurisdiction of the other authority in dispute, in this case that of Gipuzkoa, by reaffirming two basic principles already applied in early decisions: that there is solely one authority with inspection jurisdiction and that the volume and proportion of taxation to each authority may only be determined by the authority which holds that jurisdiction.

Finally, the Supreme Court, in its ruling of 7 December, has upheld the decision of the Arbitration Board 4/2014, of 13 April, which found applicable the third rule of Article 27.1 of the Economic Agreement, which attributes the exclusive competence to the authority of the domicile for tax purposes when the volume of operations of the entity does not exceed the amount of EUR seven million (six million in the wording in force as of the date applicable to the case). It dismissed an alleged unjust enrichment argued by the Spanish central authorities and found in the Second of its Legal Grounds that “in the context of the distribution of tax power between the State and the Basque provinces, analysing which authority benefits for that distribution regarding a specific operation and which would be disadvantaged is not an appropriate criterion for assessment. The Economic Agreement, as is the case of any pact, is an agreement, with cessions and trade-offs, that seek the overall balance, even if that is not achieved in a specific situation“.

Go to Administrative Doctrine

The Constitutional Court, in its ruling of 2 November 2015, declared the fundamental right to effective legal protection, enshrined in Article 24 of the Spanish Constitution, to have been breached by a ruling of the High Court of Justice of the Basque Country of the 19 June 2012, where the judicial authority dismissed the approach of a question of unconstitutionality regarding Provincial Legislation 14/1991, of the province of Gipuzkoa, that imposed on that territory the obligation to pay the Wealth Tax when that tax had been abolished in the rest of Spain. The High Court argued that the court of first instance had erred in its reasoning, with a breach of that fundamental right, by dismissing the approach of a question of unconstitutionality by applying the provisions contained in Additional Provision 5 of the Organic Law 2/1979, in the wording approved by Organic Law 1/2010. As is generally known, the analysis of the constitutionality of the precepts of the organic law that enshrined the so-called “armour-plating” of the provincial legislation is pending after the appeal lodged by different Autonomous Communities.

Ruling of the Constitutional Court

The “topic of the month” announced on the cover of issue nº 212 of Forum Fiscal is an analysis by Iñaki Alonso Arce in which the author argues in favour of the fiscal autonomy of the “chartered” [“foral”] provinces. On the one hand he mentions numerous court rulings concerned with the interpretation of the much-cited “chartered province safeguard clause” and the area of application of the ring-fencing of “chartered province” regulations; on the other hand he states that the Bilateral Committee for Cooperation between the State Administration and the Administration of the Autonomous Community of the Basque Country has resolved against extending the obligation of using the Spanish Official Gazette (BOE) for notifications to appear in proceedings of a fiscal nature to be conducted by the treasury departments of the chartered provinces and by local bodies in the Historical Territories.

In issue nº 25 of the journal Mediterráneo Económico Prof. Julio López Laborda, who holds the Chair of Public Economics at the University of Zaragoza presents an in-depth examination of the role played in the negotiations for a new system of financing for the autonomous regions by discussions on the degree of levelling out of the regions in an article entitled El futuro de la financiación autonómica. La Reforma de la nivelación [“The Future of Financing for the Autonomous Regions: The Reform for Levelling Out“]

Go to jurisprudence.

On 21 and 22 January, the III Economic Agreement Seminar will be held in the Tomás Moro Hall at the seat of the Basque Parliament in Vitoria-Gasteiz.

As was the case in the previous two seminars, the Basque Parliament has worked with the Association for Promoting and Disseminating the Economic Agreement-Ad Concordiam to organise the sessions. The speakers on this occasion will focus on the Economic Agreement as a fiscal federalism model. Other international models and their characteristics will therefore be analysed from the perspective of the Economic Agreement system.

Roberto Bernales Soriano, Professor of Tax Lax at Deusto University, will provide an overview of fiscal federalism in the 21st century on the first day. It will then be the turn of Julio López Laborda, Senior Professor of Public Economics at Zaragoza University, who will compare the provincial and common regime financing model, and the session will end with Mikel Erkoreka González Researcher at the Contemporary History Department Universidad del País Vasco /Euskal herriko Unibertsitatea, who will analyse Swiss fiscal federalism from the Basque Country perspective.

The second day will begin with Gemma Martínez Bárbara, the Head of the Fiscal Policy Unit at Bizkaia Provincial Council and member of Ad Concordiam, who will address the relations between the fiscal federalism models of the United States and of the Basque Country. James Johnston, Clerk at the Scottish Parliament, will then speak about fiscal devolution to Scotland, starting from the Basque experience. The Basque Government’s Minister for the Treasury and Finances, Ricardo Gatzagaetxebarria Bastida, will consider the current situation of the Economic Agreement to bring the event to a close.

Seminar programme

Pedro Luis Uriarte, the Minister for the Economy and the Treasury of the first Basque Government between 1980 and 1983, has today launched his “El Concierto Económico vasco: una visión personal” at the Deusto Business Alumni Meeting at the CRAI building at Deusto University Bilbao. He spent two years working on this extensive book and it covers all the situations and problems that the Economic Agreement has faced since it was introduced on 28 February 1878.

The book has been published in a digital format and will be available on www.elconciertoeconomico.com.

Uriarte stressed that “the Economic Agreement is the cornerstone of our self-government, even though it is not sufficiently known or recognised by the Basque citizenry itself.”

The book was also launched in Donostia-San Sebastián on the 17th and in Vitoria-Gasteiz and Pamplona-Iruña on the 18th.

Link to Deusto Business Alumni