LOFCA: Funding and Financial Autonomy of Spanish Regions
LOFCA: Financial Autonomy of Spanish Regions
The LOFCA (Organic Law on the Financing of the Autonomous Communities) establishes basic principles that broadly coincide with the EC (Spanish Constitution), to which is added:
- Principle of Stability: The state guarantees economic balance by taking measures to achieve economic stability, internal and external budgetary stability, and harmonious development between the various parts of Spanish territory.
- Principle of Sufficiency: The regions should have adequate resources for the exercise of their powers.
- Principle of Institutional Loyalty: Under this principle, the impact of the State’s actions in tax matters or actions of general interest that may accrue unforeseen obligations to the Autonomous Communities (CCAA) will be assessed.
- Principle of Solidarity: Within each CCAA.
The resources of the Autonomous Communities are also listed in the EC and are:
- Taxes wholly or partly by the State.
- Surcharges on state taxes.
- Shareholdings in State revenue.
- Their own taxes, fees, and special levies.
- Transfers from the Inter-territorial Compensation Fund.
- Other allocations from the General State Budget.
- Revenues accruing from their property and private law income.
- Product credit operations.
The LOFCA provides the same resources as the EC, adding the proceeds from fines and penalties within their competence and their own public prices.
Taxes Transferred, in Whole or in Part by the State
The taxes that can be paid according to LOFCA are:
- Tax on Income of Physical Persons, partially with a maximum tax rate of 33%.
- Heritage Tax.
- Transfer Tax and Stamp Duty.
- Tax on Inheritance and Donations.
- Value Added Tax (VAT), partially to a ceiling of 35%.
- Excise Manufacture, partially with a ceiling of 40% each.
- Tax on Electricity.
- Special Tax on Certain Means of Transport.
- Taxes on Gaming.
- Retail Sales Tax of certain hydrocarbons.
Stable Tax Surcharges
Regulated by LOFCA, these can be applied to the subject of transfer taxes except for taxes on retail sale of certain hydrocarbons. VAT and Excise charges can only be established when the CCAA has jurisdiction.
Shares in State Revenues
The Organic Law 7/2001 establishes the form of participation by regional governments in state revenues. This participation is accomplished using the Sufficiency Fund, which is the difference between expenditure needs of each CCAA and fiscal capacity. The initial value is set in the Joint Commission of transfers between the State and each Autonomous Community.
The criteria taken into account in distributing the funding for the block of common competencies are:
- Population (94%)
- Surface area (4.2%)
- Dispersion (1.2%)
- Insularity (0.6%)
Other redistributive measures also apply, such as support to the autonomous communities that have experienced significant depopulation or those with lower relative wealth.
The block management skills of health care services of social security is distributed according to population covered, the population aged 65 years and insularity.
The social services of the SS, according to over 65 years.
Their Own Taxes, Fees, and Special Levies
The power to establish and levy its own taxes is governed by Art. 6 LOFCA and refers to taxes and special contributions, which have barely been used.