dissabte, 26 d’octubre de 2013

Are Catalan Companies Really Transferring to Madrid?

First, it was Mr Enrique Ossorio, the Economy Minister of the Autonomous Government of Madrid, last August 19th. He was smart and polite. He only "remarked" that 1,060 corporations had left Catalonia in the last 3 years to go to Madrid. A couple of days later, the right-wing daily La Gaceta took another pot-shot: "Catalan Money Flees to Madrid"

Spanish unionism is showing a serious lack of arguments in the debate on Catalan independence, in every aspect. But this lack is particularly dramatic in the economics area. The plundering that the Catalan economy has to bear is so huge and has lasted so long that is hard to hide, and the Catalan people have realized what the situation is.

That's why the words of Mr Enrique Ossorio at the press conference last August 19th are surprising. He said that according to a study by market intelligence firm Axesor, "over 1,000 corporations left Catalonia for Madrid over the last 3 years because of the attractive policies for the corporations put in place by our (Madrid) region". Nothing further was necessary. The allusion to the "independence process in Catalonia" was clear to everybody. And a couple of days later La Gaceta reinforced the idea by talking about a "massive exodus of corporations", the "financial and commercial isolation of Catalonia" and "jeopardised investments"

Let's do some analysing

A – 1,060 corporations leaving Catalonia for Madrid in 3 years means an average of 353 corporations a year. Taking into account the efforts of Spain's "radial policy" (everything starts and ends in Madrid) and also the policy that puts Madrid at the centre of everything (high speed trains, motorways, AENA Spanish Airports and Air Navigation Authority) that Spain has applied for centuries, but that has been racked up in the last 30 years, one can't really say that the rate of corporate transfer has been successful. Because the reality is that the radial model (everything in the centre: Madrid) is designed to oversize Madrid -the capital of Spain is a kind of economic resources hoover- at the expense of the peripheral Spanish regions, which are far more active and dynamic in economic terms. And not to mention the ethics of someone who brags of stealing corporations from other regions, with the implicit unemployment and poverty. But no one is complaining about that in Spain. If it were Catalonia bragging about attracting corporations from other parts of Spain, things would be very different.

B – If we take the total number of corporations that have taken flight for Madrid in the 3 years in question, Catalan ones represent 20% of the total, much in line with the Catalan share of Spanish GDP. So nothing out of the ordinary there. When Mr Ossorio remarks specifically that Catalan corporations are going to Madrid, frightened by the independence process, one presumes, is Mr. Ossorio saying there are also independence debates going on in the regions of Castilla-La Mancha from which 679 companies have migrated to Madrid, Valencia (784), or the super-Spanish Andalusia (763)? But nothing has been said about the flight of these corporations. Or did Mr. Ossorio shrewdly take advantage of the situation to drop the bomb and get his 15 minutes of fame? Two days later La Gaceta was less subtle. This lack of rigour by the Spanish media and politicians, including some Catalan unionists, is exasperating. Oh, and how many corporations migrated from the rest of Spain to Catalonia? No data about that...

C – An in depth examination would be necessary to assess the qualitative details of the composition of this minor transfer of businesses. There are cases of corporate re-structuring (Coca-Cola's Spanish partner COBEGA), others motivated by mergers & acquisitions (Arbora-Ausonia acquired by Procter & Gamble, Schlecker's Spanish business acquired by DIA, both moved to Madrid because the head offices of the acquiring companies were there), and there are probably some cases related to the inheritance and donation tax burden, greater in Catalonia because of the economic plundering by the Spanish administration. This higher taxation causes the wealthy to move their tax residence to Madrid or other regions (through property holding companies). Even CEOs themselves may be tempted to move to Madrid, since the tax pressure there is lighter on their personal income – it is a cruel paradox that in Catalonia taxes are higher due to the fiscal deficit and also due to the economic pressure from the Spanish Government, which leads to loss of business and jobs. Could it be that some transfers of corporations to Madrid are motivated by fear of the independence process? There is freedom of opinion and movement, but it is surely a real minority within this minority. Suggestions, such as La Gaceta's, that the transfer of 1,060 businesses to Madrid are motivated by the fear of independence of Catalonia are once again proof of demagoguery against Catalonia, which we are unfortunately used to. And since this independence process started on September 11th, 2012, should the fear of the independence process be a factor for transfers in 2010 and 2011?

D – How many companies are there in Catalonia? As per data provided by the Statistical Institute of Catalonia (IDESCAT), at the end of 2012 there were over 592,000 businesses in Catalonia. If we also consider the facilities of companies with head offices outside Catalonia, the figure rises to 602,000. If we take into account that according to the Spanish Statistics Institute (INE) there were 3,199,000 corporations in Spain at the same date, we reach a couple of conclusions:

1) Catalonia accounts for 18.5% of the total number of companies in Spain and 18.8% of the facilities. A leading position.

2) It is not pleasant to see any corporations leave, but a loss of 353 a year represents 0.05% of the companies in Catalonia. A total of 1,060 in 3 years.

Making a headline of that is a bad joke. Besides, as pointed out above, we should also take into account how many came from the rest of Spain, as well as the type of companies that left Catalonia and the reasons for doing so.

E – The rigour of the Spanish Internal Revenue (AEAT) tax audits in Catalonia may be one of the true causes for the departure of some corporations. It is common knowledge amongst tax advisers and consultants how different tax audits in Catalonia are than in the rest of Spain. If a unionist-leaning newspaper like La Vanguardia reflects the question  then we must consider that this is most likely true. Contrast that with the fact that most tax avoidance is concentrated in the very large corporations with the advice and counselling of the most important law firms, all politically well-connected, and mostly based in Madrid. Another clear example of how the Catalan economy is harmed. It is more than likely that instead of fear, what many entrepreneurs and CEOs of Catalan companies feel for independence is eager impatience, to rid themselves of this inequitable tax treatment and the legal uncertainty that goes with it.

F – The economic data shows a very different reality to that depicted by the Madrid region's Minister of Economy and by La Gaceta. Catalonia accounts for 25% of Spain's exports – the leading region—and in 2012 the number of Catalan exporters reached a new record, with 46,000 Catalan businesses exporting their products worldwide, with an increase in 2012 (one year) of 2,732 companies, nearly three times the number (1,060) that left for Madrid in 3 years—again apart from not knowing the kind of companies that left.

G – To show how weak and false Mr. Ossorio's and La Gaceta's reasoning is, the Financial Times, no suspect of Catalan nationalism, has placed Catalonia as the second European region in attraction for foreign investment during the first half of 2013, right in the middle of the independence process. Another thing to consider is that Barcelona is the most important cruise base in the Mediterranean, the 4th busiest in the world. Rather an unlikely effect of fear of independence.

So, again we face a case of demagogues aiming to cast shadows of doubt and discredit on Catalonia and its economy. Responding to this kind of endless inflammatory, groundless attacks is becoming a tough task that requires too much energy. So probably in the future we should simply preclude this kind of statements arising from the groundless arguments of Spanish unionism.

As the renowned economist Oriol Amat says in a tweet, "If you invest more in a region and you boycott the port, the airport and the railway in another... you encourage more companies to go to the former". In fact, it is a miracle that with the Spanish Administration against it, Catalonia continues creating jobs and businesses. But we can't bear this situation for much longer.

Àlex Furest


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