In this article, EvalPub researcher Amadeo Fuenmayor discusses the differential tax situation of the Madrid region with respect to the rest of the Autonomous Regions as a result of the capital effect.
First, Amadeo discusses the high weight of the capital effect in Madrid. Spain’s capital centralises almost all the public employees of the general state administration, as well as the main state public bodies and economic and regulatory authorities. This political concentration also acts as an attraction for private entities.
As a consequence, Madrid concentrates a large number of civil servants and workers from various sectors with high purchasing power who generally make greater use of private health and education services. As a result, the Region of Madrid has lower average public spending than other regions, which allows it greater discretion in the downward regulation of taxes over which the region has regulatory powers.
The Autonomous Region of Madrid has a minimum collection in all taxes (own taxes, IP, ISD, IRPF). Thus, Madrid taxpayers are those who, on average, show the greatest savings in tax payments. However, it should be noted that these savings are not the same for all taxpayers, since those with higher income levels are those most favoured by the regulated tax benefits.
In conclusion, the author affirms the different tax treatment in the Community of Madrid, due to the capital effect. The author suggests the possibility of giving differential treatment to the capital of the country, as is done in other countries such as Mexico or the United States, within the Autonomous Region Financing System.