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Study of the agreement

The Quota Concept

The legal definition of the Quota is laid down in article 49 of the Economic Agreement, which literally reproduces the contents of letter d), paragraph 2, and article 41 of the Statute of Autonomy of Euskadi.

The contribution of the Basque Country to the State shall consist of an overall quota, comprising the quotas from each of the Historical Territories, as the Basque Country's share of all the charges of the State not assumed by the Autonomous Community of the Basque Country.

Not only are the competences of the Basque Country relevant in terms of quantity and quality but the exclusive competences of the State are of great relevance as well. Since the Economic Agreement assigns most of the capacity to obtain income to the Basque country but not the whole of the expense competences to be executed, there is an unbalance in the financing of the different levels of administration involved. The Quota is the mechanism which equalizes the negative balance of the State, caused by the legal finance framework laid down in the Statute of Autonomy of the Basque Country and in the Economic Agreement, which assigns a broad tax capacity to the Basque Country

The Quota is just the variable which equalizes this unbalance, that is, the payment the Basque Country makes to the central Government in order to finance the competences the State executes.

These capacities are known as non-assumed competences (by the Autonomous Community). Some of this expenditure is made out of its territory (for instance, the funding of the Royal Household, the Central Institutions of the State, the Congress, the Senate, the Army, Foreign Affairs or the contribution to the European Union). Some other expenses, which are the exception, are made in the territory of the Basque Country (for instance, expenses in ports and airports of general interest or in the High Speed Train or AVE).

In addition, most of the taxes are collected by the Historical Territories of the Basque Country (agreed taxes). However, the Central Government obtains some income, which for the purposes of the Quota, is known as non-agreed income (dividends from the Banco de España, transfers from de European Union, sales of real invest and so on) which are to be attributed to the residents in the Basque Country. The non-agreed income shall be subtracted, therefore, from the amount the Central State expends yearly in non-assumed competences.

Finally, the Central Government doesn't finance its expenses only with tax income or with any other non tax revenue. In fact, some of them are paid with deficit, that is, the State´s delay for the future the payment of the incurred expenses. Deficit is another of the categories within the non-agreed income group, with the peculiarity that this item is not accounted in the State's budget, Chapter 9, as it is calculated by the mere difference between the total expenditure allocated in the State General Budget and the addition of the income allocated in Chapters 1 to 8.

With these subtractions, the Quota is, ultimately defined as:

THEORETHICAL QUOTA CONCEPT

QUOTA = Expenditure of the Central Government in non-assumed charges by the ACBC

- Non-agreed revenue of the Central Government

- Central Government deficit

     = Expenditure imputable to the ACBC in non-assumed charges (NAC)

- Non- agreed revenue imputable to the ACBC (NAR)

- Deficit imputable to the ACBC (D)

The assignment of the Central Government expenditure and income to the Basque Country is made using an imputation method. It measures the value of the variable for all Spain and imputes a fixed percentage of the total value (as indicator of the benefit) to the Basque Country. This system is used to estimate non-agreed expenditure as well as non-agreed income and the part of deficit imputable to the Basque Country. The Economic Agreement sets that the percentage attributed to the Basque Country in order to finance the non-assumed charges, known as the attribution rate or imputation index (i), which must be basically fixed in accordance with the income of the Historical Territories relative to the total of the State.

In short, the Quota is the result of the application of the following formula:

QUOTA = (NAC - NAR - D).i

being,

NAC = the value of the non-assumed charges as accounted in the General Budget of the State

NAR = the value of the non-assumed revenue as accounted in the General Budget of the State

D = Deficit derived from the General Budget of the State

i = Imputation or attribution index

If you would like to get into the practical methodology for determining the Quota in depth, press the following link: Methodology for determining the Quota