Catalonia defies Madrid in approving new tax on bank deposits

In defiance of the central government, the Catalan administration on Tuesday approved a tax on bank accounts from which it hopes to take in 500 million euros a year.

In legislation accompanying the state budget, the central government also included a national tax on bank deposits, but with a zero rate. The aim of this was to prevent the regions from having their own such tax, as was the case of Extremadura, the Canary Islands and Andalusia.

The tax in Catalonia is due to come into effect this week and will apply to all banks operating in the region regardless of where they are headquartered.

The spokesman for the Catalan government, Francesc Homs, said the decision to impose the tax was to “ring-fence” the region’s “fiscal space.” Catalonia understands that the central government has yet to formally approve the creation of a zero-rate bank deposit tax.

The establishment of the bank deposit tax is one of the demands of the Catalan Republican Left (ERC) in exchange for supporting the center-right nationalist CiU group to allow it to form a stable government. The CiU was the most voted party in regional elections held last month but failed to win the absolute majority it was seeking. ERC came second in the poll.

Homs said the approval of the tax did not mean that the CiU has sealed a deal with ERC to allow it to govern. However, CiU sources said they believe that after the approval of the tax a deal could be reached with ERC this Tuesday itself.