Spain’s Public Finance Structure and Budgeting
Spain’s Public Finance: Structure and Budgeting
Public finance income and expenses are reflected in their own budgets. The Spanish public sector structure has been set up in three major levels:
State Management
Consisting of public administrations, autonomous bodies, and other public entities. The entirety of its income and expenditure is reflected in the State Budget.
Autonomous Communities
They have their own budgets, and their financing comes through their participation in government revenue, with surcharges on state taxes, and through their own taxes or those transferred by the State.
Local Entities
They also draft their own budgets and are financed via contributions from the Central Administration and by their own tax rates (provincial councils and municipalities).
The Budget: A Yearly Plan
The budget is the plan that includes revenue and expenditure for a year.
General State Budgets
Include amounts corresponding to statewide operations in Spain (the most important part is allocated to the various ministries).
Budgets of Autonomous Bodies
These are public entities with their own legal personality, distinct from that of the state. They are created by law. This legal formula is adopted to provide greater flexibility and efficiency to the provision of their services.
Public Business Entities
These are entities of public law engaged in the provision of services or production of goods of public interest and are subject to economic regulations. Although they are generally governed by public law, they may also be subject to private law. Examples include: RENFE, AENA, Ports of the State, and State Lotteries and Gambling.
Social Security Budgets
These are prepared by the Ministry of Labour and Social Security and provide a livelihood within the system. The general budgets of Social Security are financed by social contributions from workers and enterprises, and transfers from the state. It pays for benefits such as healthcare, sick leave, and retirement.
Content of the General Budget
The general budget should include the following documents:
- Statements of expenditure, which include the credits needed to meet compliance with obligations. This is a list of expenditures with their respective amounts.
- Statements of revenue, which include estimates of the revenue to be collected during the fiscal year.
- The financial statements of State commercial companies.
Types of Revenue
- Taxes: These include income taxes, tax rates, and special contributions.
- Non-tax revenues:
- Current transfers: These are the amounts that the general administration of the state receives from other entities.
- Property income: This encompasses the income generated by the assets of the state, which are paid into the public treasury.
- Capital transfers: These refer fundamentally to revenue from the Structural Funds of the European Union to develop administration investment projects.
Management of State Budgets
The management of state budgets is a set of operations to achieve the objectives set in each program component. It is achieved through the realization of the costs included in the budget. It is divided into four phases:
- Authorization for the expense.
- Commitment of the expense.
- Obligation.
- Payment order and realization of the payment.
Control of Public Spending
There are two different levels of control of public spending: internal and external control.
Liquidation and Closure of Budgets
This takes place on December 31st. The objective of budgets is subject to the execution control of Parliament. For this, the Court of Auditors ensures that the state general budget reflects all transactions executed during the fiscal year.