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Study of the agreement

The Economic Agreement Financing System

The Economic Agreement regime, from the approach of the tax federalism theory, is just another of the existing decentralization models, among the increasing and numerous ones currently in force in the international context. In particular, it is part of the Spanish model of "asymmetric federalism", sharing this framework with the Navarrese Convention and the Common Territory financing system.

The Agreement system has several features that make it unique in Comparative Law. Its particularity lies in the fact that it entitles the Basque Country the whole of the income from its own tax system and with this income it shall pay for the whole of its expenses competences and shall contribute to finance the expenses derived form the general competences of the Spanish State. In addition, it confers the competent institutions of their Historical Territories (General Assemblies) the capacity to amend the Economic Agreement, in accordance with the preferences of the politicians who are in charge of the government at the moment and who, therefore, account for such decisions in front of all citizens.

The Economic Agreement puts the Treasuries of the Basque Country in a status close to the one of the Treasuries of Member States in the European Union, in the sense that they only differ from the latter in the lack of competences concerning Custom income and in the absence of capacity to adapt their legislation the harmonized indirect taxation (VAT and Excise Duties)

From the point of view of regional financing systems, the Economic Agreement regime is based on different monetary transfers between the Spanish State and the Basque Country, in order to:

  1. On the one hand, guarantee the effective availability for the Basque Country of the attributed income.

  2. On the other hand, fix the participation of the Basque Country in financing the general competences the State executes.

Both targets are achieved through two main financial flows: the Quota and the Tax Adjustments.