The Basque government and the councils of Álava, Bizkaia and Gipuzkoa have reached a preliminary agreement on the new Contribution Law for the period 2022-2026, which maintains the current horizontal coefficients and increases the vertical coefficient from 70.04% to 70.81%.
Specifically, this law establishes the distribution of tax collection of the foral estates. The distribution of resources between the common and provincial institutions is called vertical distribution. For its part, the distribution of contributions among the historic territories is called horizontal distribution and it is determined by the Basque Council for Public Finance.
In this sense, the Basque Council of Public Finance will convene, in an extraordinary way, next july 15 to approve this new methodology that will replace the current law, extended from 2011. Subsequently, the Governing Council will have to approve the Bill, which will be sent to the Basque Parliament for approval.
The Basque Government and the Basque councils have stressed that having the Law approved before the Basque Council for Public Finance in October would enable Basque institutions to draw up the Budgets for fiscal year 2022 applying this new methodology.
“The pre-agreement reached includes the claims that the different institutions have been claiming during the validity of the current methodology and, above all, highlights the incorporation of the precepts derived from the Law of Local Institutions of Euskadi (LILE), with a chapter especially dedicated to municipal financing“, they explain in a note.
Among its main points, the vertical coefficient increases from 70.04% to 70.81% mainly due to the integration of new transfers assumed by the Basque Government in recent years.
This coefficient, they have specified, attends to the distribution of competences of the different institutional levels and, in addition, reflects the integration of the amount corresponding to the Social Services Fund in the vertical distribution model that is extended to 35 million, from the current 20 million .
The horizontal coefficients of contribution, for their part, maintain “in the same terms” the methodology for the current calculation.
On the other hand, as for the General Adjustment Fund, the objective of ensuring that the relative weight of the collection of each provincial council reaches 99% of its horizontal coefficient is maintained. The maximum limit of the Fund increases to 1.45% of the resources that are distributed among Basque institutions, compared to the 1% set by the current Contribution Law. This increase will allow “to increase the guarantees for the Historical Territories.”
Likewise, a minimum percentage of participation of local entities in the agreed taxes, specifically 39.23%. In this way, they have underlined, local entities of the three Historical Territories “will consolidate a percentage of participation in the agreed taxes higher than that in force in Law 2/2007”.
George Holan is chief editor at Plainsmen Post and has articles published in many notable publications in the last decade.