Financial Law: Taxes, Budget, Heritage, and Public Credit
Unit 1: Financial Activity and Financial Law
Financial Activity: An activity performed by the state and other public bodies (municipalities, autonomous regions, etc.) which consists of obtaining financial resources to apply them to public collective needs (e.g., financing public expenditure). This activity is instrumental in character and is also said to be in the 2nd grade.
Financial Law: The discipline that aims to study the legal regulation of financial activity. According to Giannini, financial law is defined as a set of rules that discipline the acquisition, management, and organization (expense) of means that make life possible for public bodies. These are considered the three phases of financial activity. Another definition, according to Sainz de Bujanda, states that it is a rule of public law that organizes the resources on which the state and public organizations are financed, and also governs procedures to collect revenue and manage expenses and payments such subjects intended to achieve their aims.
Branches of Financial Law
1. Tax Law
The branch of financial law designed to study the establishment and reduction of *tributos*. A *tributo* (according to Giannini) is an imposed financial benefit that is intended to ensure the public entity has the means to finance public services. Under tax law, we distinguish:
- a) Material Tax Law: Contains the legal rules governing the legal relationship of tax, i.e., the rules concerning the establishment of charges and their essential elements.
- b) Formal Tax Law: Refers to the procedures of application of taxes, i.e., the set of legal rules designed to ensure compliance with the substantive tax relations and relations between public administration and individuals.
There are three formal procedures to implement the tax code:
- A) Settlement: Its purpose is to verify compliance with tax obligations.
- B) Regulation: Its purpose, or by virtue of which, obligations become effective.
- C) Review: To review those administrative actions not in conformity with the law.
2. Budget Law
Studies the legal regulation of public spending. From a legal point of view, it can be defined as a set of rules governing the preparation, approval, execution, and control of the state budget and other public bodies.
Bereijo defined the state budget as the legislative act that authorizes the maximum amount of costs that the government can incur in a given period of time in the proceedings, which are set properly, and also provides the revenue needed to cover them. We conclude a number of characteristics:
- A) It is a legislative act (approved by law).
- B) It is not just any law; it is a law by which the legislature authorizes the government to spend up to a certain limit.
- C) On the revenue side, the budget contains only a mere prediction.
Budgets are not only the legal expression of the state’s financial plan for a period of time.
3. Heritage Law
Studies the structure and property management as financial resources. Like taxes, they also generate revenue to fund public spending. Three things are studied:
- A) Property management ownership/public property: public property or *demaniales*.
- B) Management of publicly owned companies (RENFE).
- C) Participation of public authorities in privately owned companies.
4. Public Credit Law
It aims at the issue of public debt, which has been a traditional remedy for public finance. While, originally, the public debt issue was an extraordinary admission of the State since it only issued debt to cover deficits or *presupuestarios*. Currently, public debt is a revenue account with which the State or other public bodies operate every year since public debt is issued as a form of income expressly provided for in budget laws. Currently, there are two types of debt:
- A) Public Borrowing: Consists of private loans made to the public entity under certain conditions, which are fixed by law and which involve a number of advantages for loans (some interest). This approach is documented in so-called securities (bonds, bills, notes, etc.).
- B) Operations not documented in loan securities: These are lending operations performed by the public body, other states, international agencies, and banks, among others (not individuals).