New Madrid mayor’s economic ideas slammed in Tax Agency report

A Tax Agency report analyzing the economic measures proposed by Madrid’s new leftist mayor, Manuela Carmena, has concluded that some of her ideas are “nonsense,” others violate existing legislation, and yet others would sink Spain into bankruptcy.

Carmena was instated on Saturday after her left-wing coalition Ahora Madrid, which includes anti-austerity party Podemos, allied with the Socialists to take control of the city council away from the Popular Party (PP) despite the latter’s narrow victory at the May 24 elections. The conservatives had ruled the capital uninterruptedly for 24 years.

Handing out loans like they were subsidies would lead to bankruptcy”

The very existence of such a report, to which EL PAÍS has had access, raises questions. Finance Minister Cristóbal Montoro, of the PP, has already come under fire after confidential tax information about Podemos ex-leader Juan Carlos Monedero was leaked to the press. More recently, Madrid mayoral candidate Esperanza Aguirre, also of the PP, had her income statement aired publicly right before the elections.

The tax experts cast serious doubts over the economic program that Ahora Madrid presented to the public during the mayoral race. While the notion of renegotiating the interest rate on the city’s €5.9 billion debt is supported by other parties, such as the Socialists and Ciudadanos, Ahora Madrid goes further.

“The restructuring they propose is not a renegotiation; it’s not about reducing costs but about arbitrarily deciding what they consider to be legitimate debt and what not,” reads the report. “They openly discuss debt default. Nobody would ever again offer financing to either Madrid or Spain, which would go bankrupt and sink into poverty.”

Ahora Madrid also wants to “restructure” several municipal taxes, but the Tax Agency notes that many of its proposals have already been attempted before, and occasionally struck down by the courts. Former mayor Alberto Ruiz-Gallardón (PP) raised fees for sidewalk cafés by 150 percent in 2006. A bid by the city to tax cellphone antennas was shot down by the Supreme Court. And a tax on bank ATMs was already considered and ruled out by the local government in 2010.

As for “activating” an economic activity tax for large companies, the agency feels that this would require a prior legal change.

But the biggest criticism is reserved for Ahora Madrid’s idea to create a local public bank to fund businesses and social projects. The report says this would “not only be a mistake” that would require “between €10 billion and €20 billion” – the municipal budget is under €4.4 billion – but would also be complete “nonsense” because “handing out loans like they were subsidies would lead to bankruptcy.” Also, the city lacks the powers to create such an institution, and would require permission from the European Central Bank.

The report does see a few initiatives as feasible, such as progressively taking back control of municipal services outsourced to private companies, but it reminds Ahora Madrid that the law would force the city to provide the latter with compensation.

It also seems possible to ask the central government for a bigger share of state revenue. Right now, Madrid gets between €100 and €130 per capita less than Barcelona, even though it is in charge of delivering the same services to its residents. Tax experts feel that Madrid could request up to €400 million more.

As for eliminating current tax exemptions for embassies and places of worship, the report reminds Ahora Madrid that this would require the passing of a national law. The city does, however, have the power to reintroduce the garbage tax on the most expensive buildings, which could bring in around €35 million a year.