The Canarian PSOE is advocating for a “radical overhaul” of the management of the Economic and Fiscal Regime (REF), aiming for an increased degree of self-governance over its tax incentives, including the Canary Islands Investment Reserve (RIC), the investment deduction (DIC), and the bonus for the production of tangible goods, among others. This “ambitious” initiative is part of the framework presentation to be debated at the 15th Congress of the Canarian Socialists next weekend in Adeje, Tenerife, crafted by economist Antonio Olivera, who is closely associated with the former Canarian president and minister of Territorial Policy and Democratic Memory, Ángel Victor Torres, the sole candidate for re-election as the regional secretary of the PSOE.
Olivera notes that during the Study Commission on the REF, convened in the Parliament of the Canary Islands, various speakers highlighted the practical challenges facing the jurisdiction of the Canary Islands, which has not been functioning as an effective stimulus for the Islands. Consequently, the socialists argue it must be “thoroughly” reviewed in order to serve as a genuine mechanism for boosting the productivity of the Archipelago. To this end, they propose a reform focusing on two areas: governance and enhancement of the tools that comprise the REF.
Competence Scope
Currently, two state laws – Law 20/1991 and Law 19/1994 – govern the REF, both requiring the consent of the Government of Spain or the Cortes Generales for amendments. The PSOE asserts that it is necessary to be “courageous” in proposing to the State, following consensus in the Islands, that the management “be fully transferred to the jurisdiction of the Canary Islands.”
This could involve restricting the set of tax incentives to a “lump sum” to be negotiated with the State. Once the amount is established, “the Canary Islands could possess the complete authority to propose the regulatory changes required by the REF,” allowing them to modify, create or eliminate incentives, while being mindful of the ‘straitjacket’ of the total negotiated tax benefits,” Olivera explains.
By managing the REF tax incentives, the lingering issues of legal uncertainty that have arisen over the years with successive Spanish governments would be mitigated since the jurisdiction of the Islands has often been subject to alterations from Madrid, such as restrictions on cinema aid or the implementation of the RIC, among other reported matters from the Canary Islands.
Olivera highlights that the proposal for self-governance of the REF signifies “an unparalleled adjustment in the existing system.” He cautions, “We must be realistic about the feasibility of implementing it shortly, although we believe that it is the ultimate goal that the Canary Islands should pursue regarding the management of its REF.”
REF Consortium
In the meantime, the PSOE suggests a temporary interim measure involving the expansion of the Canarian Special Zone Consortium (ZEC) to a new “REF consortium,” establishing a co-governance body between the Ministry of Finance and the Government of the Canary Islands for all REF instruments, streamlining and facilitating changes, modifications, legal interpretations, and other aspects of the Canarian jurisdiction. “The Consortium model has proven effective with the ZEC and presents a significant opportunity for extension,” he asserts. Additionally, they propose expanding incentives for activities such as computer programming and development, or establishing a “capitalisation reserve for the Canary Islands” with a tax differential of 20 points compared to that applied across the rest of the State.
Tourist Tax and Holiday Home Moratorium
These are a few of the proposals outlined in this framework presentation spanning over 272 pages, which serves as a strategic guide for the upcoming elections, as the PSOE is committed to reclaiming “the Presidency of the Government of the Canary Islands.” Among the initiatives, the socialists place particular emphasis on the “implementation of a tourist stay tax.” They also advocate for a moratorium on new permits for holiday homes through a decree law, pending the processing of regulations in Parliament.
Under the motto For the Canary Islands plus PSOE, this fifteenth regional congress will thus officially endorse the re-election of Ángel Víctor Torres, who enjoys full backing from the party despite his connection to the Koldo case, concerning former minister José Luis Ábalos’ advisor. Indeed, Torres is due to reappear before the Senate investigation committee on this matter, at the request of the Popular Party.
While expectations for a smooth regional Congress of the socialists run high, the upcoming one in Tenerife, scheduled for April, promises to be more complex. Last Saturday, Pedro Martin unexpectedly declared he would not seek re-election for the island secretariat. Yesterday, La Laguna’s mayor, Luis Yeray Gutiérrez, announced his intention to succeed him. Other potential candidates mentioned include Mari Brito, Aaron Afonso, and José Manuel Valbuena.
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