In a glass building overlooking Barcelona’s port, empty desks and computers wait for new workers of Catalonia’s tax agency.
As in other Spanish regions, the agency already collects some taxes on wealth, inheritance, gambling and transport.
But the regional government has spent €18 million expanding the agency in the hope that it will gain independence from Madrid in an October 1 vote that the Spanish government considers illegal.
From the shiny port office with a 20-year lease, it is hoping to wrestle control of the rest of the region’s finances, claiming billions of euros of income tax and corporate revenue currently going to the Spanish government.
Catalonia has increased the agency’s staff by 75 per cent to 700 since January and plans to fill the empty desks by the end of the year if the vote goes through. It has also opened a dozen new regional offices.
This is Catalonia’s most tangible investment in the institutional infrastructure needed for a fledgling state and highlights its government’s determination to secede. It says it will declare independence within 48 hours of a “yes” vote.
It also shows that they are likely to keep pushing for independence, even if they lose the vote.
“In a future transition, it would not be acceptable for them to keep our taxes, because they are ours and they keep a lot,” said Catalan Treasury Secretary Josep Lluis Salvado.
Madrid has declared the vote unconstitutional so there are widespread doubts about whether Catalonia can even stage a credible vote.
It may also not go in the Catalonian government’s favour. Polls show less than half of Catalonia’s 5.5 million voters want self-rule although most want the chance to vote on the issue.
The money issue is one of the roots of the problem, the feeling that Catalonia is being ripped off
It is also not clear that companies would pay up: Barcelona’s business lobby says no private firms would obey Catalan tax demands unless approved by Madrid.
But the Spanish government appears to be rattled. On Wednesday police entered the Catalonia tax office as part of a raid on regional government offices, seizing documents and cutting off phone lines, according to a department official. Police also arrested Catalonia’s junior economy minister Josep Maria Jove. It was the latest step in Madrid’s campaign to prevent the referendum from going ahead.
Catalonia’s resolve also worries some investors in Spanish bonds and the tax agency’s expansion suggests an early post-independence flashpoint with Madrid could be a financial one.
Catalonia, with an economy larger than Portugal’s, says it receives an unfair redistribution of tax revenues from Madrid.
Each year, it pays about €10 billion more in taxes to Madrid than it gets back, or around five per cent of regional economic output, according to data from the Spanish Treasury. In contrast, Spain’s poorest region, Andalusia, receives almost €8 billion more than it pays in.
“The money issue is one of the roots of the problem, the feeling that Catalonia is being ripped off,” said Angel Talavera, a Catalan economist at consultancy Oxford Economics.
If its agency took over all forms of taxation, it would also collect income, company and value-added taxes, bringing total receipts to €42 billion, Salvado said. The agency collected about €3 billion last year, according to a spokeswoman for the Catalan economy and budget department.
To avoid financial collapse, an independent Catalonia would need those tax revenues, economists say. It has €75 billion in public debt, 35 per cent of its economic output, one of the highest of all Spain’s regions, and its government bonds are already classified as “junk” by credit rating agencies.
Investors are growing nervous as the referendum nears: the additional yield that Catalan bonds pay over Spanish short-term debt is at close to a nine-month high of about 300 basis points.
The Catalan government last issued a bond in 2012, two years ahead of a previous failed independence referendum. It is not currently considering any bond issues, a spokeswoman said.
Upon a declaration of independence, Salvado said Catalonia would seek to open talks with Madrid to take over all taxation in phases. It would start in October by pocketing €2.5 billion in taxes from about 700 public Catalan firms that currently goes to Madrid.
Later, the agency would collect tax from private firms and individuals. It could take years and the agency would need at least another 4,000 employees, Salvado added.