Public Finance: Budget Structure, Revenue Sources, and Modification Procedures

Posted on Nov 1, 2025 in Law

Budgetary Structures and Economic Classification

Economic Classification of Budget Expenditures

The economic classification of budget expenditures of the state and its autonomous agencies is structured into chapters:

  1. Chapter 1: Personnel Expenses.
  2. Chapter 2: Current Expenditure on Goods and Services.
  3. Chapter 3: Financial Expenses.
  4. Chapter 4: Current Transfers.
  5. Chapter 5: Implementing Contingency Budget Fund.
  6. Chapter 6: Real Investments.
  7. Chapter 7: Capital Transfers.
  8. Chapter 8: Financial Assets.
  9. Chapter 9: Financial Liabilities.

General Structure of Budget Expenditures and Income

The budget structure is defined by three main perspectives:

  • Expenditure Structure: Organic Structure, Program Structure, Economic Structure.
  • Income Structure: Economic Structure, Organic Structure.

Public Revenue Sources: Taxes, Rates, and Contributions

Rates and Taxes

Rates are tributes demanded by various public bodies from individuals (taxpayers or contributors) for the use they make of a public service or in proportion to the value they receive from the levied asset.

Taxes are coercive levies without direct consideration, set by law for the State, based on the income or assets of an economic subject, whether physical or legal. Taxes, as the main source of revenue, show great diversity.

Examples of services subject to Rates:

  • Collection of garbage.
  • Construction permits.
  • Street vending licenses.
  • Gambling licenses.

Classification confirmation: B) Taxes.

Social Contributions

Social Contributions are payments made by employees and employers to Social Security and Unemployment Insurance. These funds aim to cover pensions and unemployment benefits.

The social contributions are levied over the direct taxes.

Classification confirmation: B) Social Contributions.

Classification of Transfers and Tax Types

Transfers

  • B) Current Transfers.
  • C) Capital Transfers.

Tax Types

  • B) A Direct Tax.
  • C) An Excise Tax (Indirect Tax).

Budgetary Contingencies and Limitations

Events Requiring Budgetary Action

Examples of events or benefits that may require budgetary provision:

  1. An earthquake.
  2. Floods.
  3. Benefit for the birth/adoption of a child (Note: Not included in the GEA 2007).

Budgetary Limitations and Principles

Modifications of budgetary limitations include:

  • Modifications of the quantitative limitation.
  • Amendments to the qualitative limitation.
  • Amendments to the limit.

All expenses included in the State Budget are constitutionally non-restrictive, meaning they represent a maximum limit.

Procedures for Budget Modifications

Approval and Compliance

Budget changes must comply with the relevant Act and require the approval of the appropriate body, depending on the type of budget amendment in question.

Approval bodies vary:

  • Some changes require the approval of the Council of Ministers.
  • Others require the Ministry of Finance.
  • Ultimately, some are approved by Ministers, as detailed in the section dealing with the concept and modifications of budgets.

A type of modification is: C) Changes in destination or purpose of public spending.

Accounting and Notification Process

If the decision is favorable, specifically stating the program, service, or autonomous agency, article, and concept, the Directorate-General (DG) Budget must issue an accounting document: the Credit Modification (CTM).

This CTM is referred to the appropriate Budget Office, which, in turn, sends it to the Accounting Office for recording. The Budget Office is responsible for notifying the affected units and agencies.

Classification of Public Sector Entities

Autonomous Bodies

Four examples of autonomous bodies:

  1. The National Employment Institute (INEM).
  2. Social Guarantee Fund.
  3. Traffic Chief (DGT).
  4. Senior Gazette (BOE).

Public Entities

Examples of public entities:

  • The State Agency for Tax Administration.
  • Instituto Cervantes.
  • National Intelligence Center.
  • Economic and Social Council.

Classification confirmation: B) Public body.

Public Corporations and Companies

Examples of public corporations/companies:

  • RTVE (Spanish Radio and Television Corporation).
  • AENA (Spanish Airports and Air Navigation).
  • International Development, SA.
  • ICO (Official Credit Institute).
  • Fábrica Nacional de Moneda y Timbre / Royal Mint.