In this article, the director of the Regional Taxation Chair, Amadeo Fuenmayor, discusses the differential tax situation of the Community of Madrid with respect to the rest of the Autonomous Communities as a result of the capital effect.
First, Amadeo addresses the great 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 result, Madrid concentrates a large number of civil servants and workers in various sectors with high purchasing power who generally make greater use of private health and education services. As a result, the Community of Madrid has lower average public expenditure than other regions, which allows it greater leeway in the downward regulation of taxes over which the Autonomous Community has regulatory powers.
The Community 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, as those with higher income levels are the most favoured by the regulated tax benefits.
In conclusion, the author argues that there is different tax treatment in the Community of Madrid, due to the capital effect. The author suggests the possibility of giving a differential treatment to the capital of the country, as is done in other countries such as Mexico or the United States, within the Regional Financing System.
