Spanish tax reform of 1845
Encyclopedia
The Spanish tax reform of 1845 (approved in 1844) made major changes to the tax
system of Spain
, and established the basis for a system that continues to this day.
generals Francisco Serrano, Ramón María Narváez and Juan Prim
removed the Progressive
leader Baldomero Espartero from his position as regent
, ending a three-year Progressive ascendancy. Queen Isabella II
, who had just reached the age of 13, was declared to have reached the age of majority
, ending the regency. Within a year, this led to the beginning of the década moderada
, ten years of rule by the Moderates.
, and was carried into effect by Finance Minister Alejandro Mon. This reform broke the tax system of Antiguo Régimen and established a basis for taxation in Spain that remained intact to the end of the 19th century, and most of which continued well past that date, some into the 21st century.
The prior system had separate tax regimes in the former Kingdom of Aragón
, in Navarre
, in the Basque Country
and in the rest of Spain. It involved a great variety of taxes, most of them dating from the Middle Ages
.
The reform was largely along the lines of economic liberalism
: legality, sufficiency, and generality, with a single unified fiscal system throughout the country, with an intention to eliminate barriers to economic growth. Internal customs
barriers were eliminated along with such longstanding taxes as the diezmo
s, alcabala
and millones
. In general, there was a movement from indirect tax
ation to direct tax
ation. The new system involved five key taxes:
The reform also constituted changes in customs fees (tariff
s).
. The administrative apparatus of the Spanish government was poorly prepared for the new system, so tax collection was farmed
to municipal
governments and guild
s. The consumption taxes were also widely protested: they were seen as falling disproportionately on the poor.
The tax reform provided the basis for the recovery of Spain's finances during the reign of Isabella II, and made possible a program of public works
. The system remained essentially intact until 1900, when the effect of the loss of Spain's colonies in the Spanish American War led to a further tax reform by Raimundo Fernández Villaverde
.
Tax
To tax is to impose a financial charge or other levy upon a taxpayer by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many subnational entities...
system of Spain
Spain
Spain , officially the Kingdom of Spain languages]] under the European Charter for Regional or Minority Languages. In each of these, Spain's official name is as follows:;;;;;;), is a country and member state of the European Union located in southwestern Europe on the Iberian Peninsula...
, and established the basis for a system that continues to this day.
Context
In the summer of 1843, a military coup led by the ModerateModerate Party (Spain)
The Moderate Party or Moderate Liberal Party was one of the two Spanish political parties that contended for power during the reign of Isabel II...
generals Francisco Serrano, Ramón María Narváez and Juan Prim
Juan Prim
Don Juan or Joan Prim, Marquis of los Castillejos, Grandee of Spain, Count of Reus, Viscount of the Bruch was a Spanish general and statesman.-Life:...
removed the Progressive
Progressive Party (Spain)
The Progressive Party was one of the two Spanish political parties that contended for power during the reign of Isabel II . They were to the left of the opposing Moderate Party , but also characterized themselves as liberal...
leader Baldomero Espartero from his position as regent
Regent
A regent, from the Latin regens "one who reigns", is a person selected to act as head of state because the ruler is a minor, not present, or debilitated. Currently there are only two ruling Regencies in the world, sovereign Liechtenstein and the Malaysian constitutive state of Terengganu...
, ending a three-year Progressive ascendancy. Queen Isabella II
Isabella II of Spain
Isabella II was the only female monarch of Spain in modern times. She came to the throne as an infant, but her succession was disputed by the Carlists, who refused to recognise a female sovereign, leading to the Carlist Wars. After a troubled reign, she was deposed in the Glorious Revolution of...
, who had just reached the age of 13, was declared to have reached the age of majority
Age of majority
The age of majority is the threshold of adulthood as it is conceptualized in law. It is the chronological moment when minors cease to legally be considered children and assume control over their persons, actions, and decisions, thereby terminating the legal control and legal responsibilities of...
, ending the regency. Within a year, this led to the beginning of the década moderada
Década moderada
In the history of Spain, the década moderada was the period from May 1844 to July 1854, during which the Moderate Party continuously held power.-Rise to power:...
, ten years of rule by the Moderates.
The reform
The executive council that came to power in 1844, presided over by Narváez, undertook a tax reform. The reform was proposed by a commission whose key figure was the brilliant, but logical and orderly, Ramón de SantillánRamón de Santillán
Ramón de Santillán González was a Spanish soldier, politician, and Minister of Finance.-Life:Santillán was born in Lerma . He came from a relatively poor family. He matriculated in law at the University of Valladolid in 1805; his studies were interrupted by the Peninsular War...
, and was carried into effect by Finance Minister Alejandro Mon. This reform broke the tax system of Antiguo Régimen and established a basis for taxation in Spain that remained intact to the end of the 19th century, and most of which continued well past that date, some into the 21st century.
The prior system had separate tax regimes in the former Kingdom of Aragón
Kingdom of Aragon
The Kingdom of Aragon was a medieval and early modern kingdom in the Iberian Peninsula, corresponding to the modern-day autonomous community of Aragon, in Spain...
, in Navarre
Navarre
Navarre , officially the Chartered Community of Navarre is an autonomous community in northern Spain, bordering the Basque Country, La Rioja, and Aragon in Spain and Aquitaine in France...
, in the Basque Country
Basque Country (autonomous community)
The Basque Country is an autonomous community of northern Spain. It includes the Basque provinces of Álava, Biscay and Gipuzkoa, also called Historical Territories....
and in the rest of Spain. It involved a great variety of taxes, most of them dating from the Middle Ages
Middle Ages
The Middle Ages is a periodization of European history from the 5th century to the 15th century. The Middle Ages follows the fall of the Western Roman Empire in 476 and precedes the Early Modern Era. It is the middle period of a three-period division of Western history: Classic, Medieval and Modern...
.
The reform was largely along the lines of economic liberalism
Economic liberalism
Economic liberalism is the ideological belief in giving all people economic freedom, and as such granting people with more basis to control their own lives and make their own mistakes. It is an economic philosophy that supports and promotes individual liberty and choice in economic matters and...
: legality, sufficiency, and generality, with a single unified fiscal system throughout the country, with an intention to eliminate barriers to economic growth. Internal customs
Customs
Customs is an authority or agency in a country responsible for collecting and safeguarding customs duties and for controlling the flow of goods including animals, transports, personal effects and hazardous items in and out of a country...
barriers were eliminated along with such longstanding taxes as the diezmo
Diezmo
The diezmo was a compulsory ecclesiastical tithe collected in Spain and its empire from the Middle Ages until the reign of Isabella II in the mid-19th century.-History:...
s, alcabala
Alcabala
The alcabala or alcavala was a sales tax of up to fourteen percent, the most important royal tax imposed by Spain under the Antiguo Régimen....
and millones
Millones
The Millones were an indirect tax on food in Spain in the 16th and 17th centuries. They were first imposed by Philip II and were approved by the Cortes de Castilla 4 April 1590. The tax was initially intended in 1590 as a temporary measure to replace the Spanish Armada lost in attacking England...
. In general, there was a movement from indirect tax
Indirect tax
The term indirect tax has more than one meaning.In the colloquial sense, an indirect tax is a tax collected by an intermediary from the person who bears the ultimate economic burden of the tax...
ation to direct tax
Direct tax
The term direct tax generally means a tax paid directly to the government by the persons on whom it is imposed.-General meaning:In the general sense, a direct tax is one paid directly to the government by the persons on whom it is imposed...
ation. The new system involved five key taxes:
- Direct taxes
- A tax on real propertyReal propertyIn English Common Law, real property, real estate, realty, or immovable property is any subset of land that has been legally defined and the improvements to it made by human efforts: any buildings, machinery, wells, dams, ponds, mines, canals, roads, various property rights, and so forth...
, cropsAgricultureAgriculture is the cultivation of animals, plants, fungi and other life forms for food, fiber, and other products used to sustain life. Agriculture was the key implement in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that nurtured the...
and livestockLivestockLivestock refers to one or more domesticated animals raised in an agricultural setting to produce commodities such as food, fiber and labor. The term "livestock" as used in this article does not include poultry or farmed fish; however the inclusion of these, especially poultry, within the meaning...
was projected to provide approximately 25 percent of revenue. - A subsidySubsidyA subsidy is an assistance paid to a business or economic sector. Most subsidies are made by the government to producers or distributors in an industry to prevent the decline of that industry or an increase in the prices of its products or simply to encourage it to hire more labor A subsidy (also...
to industryIndustryIndustry refers to the production of an economic good or service within an economy.-Industrial sectors:There are four key industrial economic sectors: the primary sector, largely raw material extraction industries such as mining and farming; the secondary sector, involving refining, construction,...
and tradeTradeTrade is the transfer of ownership of goods and services from one person or entity to another. Trade is sometimes loosely called commerce or financial transaction or barter. A network that allows trade is called a market. The original form of trade was barter, the direct exchange of goods and...
, which was divided into a variable and a fixed portion. - A law of tenancy, which only remained in effect for a year.
- A tax on real property
- Indirect taxes
- Consumption taxConsumption taxA consumption tax is a tax on spending on goods and services. The tax base of such a tax is the money spent on consumption. Consumption taxes are usually indirect, such as a sales tax or a value added tax...
es on certain goods such as alcoholic beverageAlcoholic beverageAn alcoholic beverage is a drink containing ethanol, commonly known as alcohol. Alcoholic beverages are divided into three general classes: beers, wines, and spirits. They are legally consumed in most countries, and over 100 countries have laws regulating their production, sale, and consumption...
s, olive oilOlive oilOlive oil is an oil obtained from the olive , a traditional tree crop of the Mediterranean Basin. It is commonly used in cooking, cosmetics, pharmaceuticals, and soaps and as a fuel for traditional oil lamps...
, soapSoapIn chemistry, soap is a salt of a fatty acid.IUPAC. "" Compendium of Chemical Terminology, 2nd ed. . Compiled by A. D. McNaught and A. Wilkinson. Blackwell Scientific Publications, Oxford . XML on-line corrected version: created by M. Nic, J. Jirat, B. Kosata; updates compiled by A. Jenkins. ISBN...
and meatMeatMeat is animal flesh that is used as food. Most often, this means the skeletal muscle and associated fat and other tissues, but it may also describe other edible tissues such as organs and offal...
and state monopolies on other goods such as snuffSnuffSnuff is a product made from ground or pulverised tobacco leaves. It is an example of smokeless tobacco. It originated in the Americas and was in common use in Europe by the 17th century...
, saltSaltIn chemistry, salts are ionic compounds that result from the neutralization reaction of an acid and a base. They are composed of cations and anions so that the product is electrically neutral...
and lotteries. - A law on mortgages, which taxed the transfer, lease, and increase of rents on real estateReal estateIn general use, esp. North American, 'real estate' is taken to mean "Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature; an interest vested in this; an item of real property; buildings or...
.
- Consumption tax
The reform also constituted changes in customs fees (tariff
Tariff
A tariff may be either tax on imports or exports , or a list or schedule of prices for such things as rail service, bus routes, and electrical usage ....
s).
Results
The industrial and commercial subsidy was widely protested and resulted in a high level of fraudFraud
In criminal law, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation...
. The administrative apparatus of the Spanish government was poorly prepared for the new system, so tax collection was farmed
Tax farming
Farming is a technique of financial management, namely the process of commuting , by its assignment by legal contract to a third party, a future uncertain revenue stream into fixed and certain periodic rents, in consideration for which commutation a discount in value received is suffered...
to municipal
Municipality
A municipality is essentially an urban administrative division having corporate status and usually powers of self-government. It can also be used to mean the governing body of a municipality. A municipality is a general-purpose administrative subdivision, as opposed to a special-purpose district...
governments and guild
Guild
A guild is an association of craftsmen in a particular trade. The earliest types of guild were formed as confraternities of workers. They were organized in a manner something between a trade union, a cartel, and a secret society...
s. The consumption taxes were also widely protested: they were seen as falling disproportionately on the poor.
The tax reform provided the basis for the recovery of Spain's finances during the reign of Isabella II, and made possible a program of public works
Public works
Public works are a broad category of projects, financed and constructed by the government, for recreational, employment, and health and safety uses in the greater community...
. The system remained essentially intact until 1900, when the effect of the loss of Spain's colonies in the Spanish American War led to a further tax reform by Raimundo Fernández Villaverde
Raimundo Fernández Villaverde
Don Raimundo Fernández-Villaverde y García del Rivero, iure uxoris Marquis of Pozo Rubio, was a Spanish statesman....
.