(Bloomberg) -- A doctor, a graphic designer and a lawyer from Catalonia are road-testing a mechanism for paying taxes that could give the regional president, Artur Mas, a decisive weapon in his campaign to force independence from Spain.

As pressure for a breakaway builds ahead of a regional election in September, the group is encouraging Catalans to use an arcane legal formula to pay their taxes to an escrow account controlled by the regional government. That would potentially deny more than 8 billion euros ($9 billion) to the Spanish state, which is legally entitled to collect taxes directly in Catalonia and most of the rest of country
The technique allows taxpayers to meet their legal obligations to the state before the regional government transfers the money to Madrid. If the dispute over Catalan sovereignty turns nasty, the regional government can then withhold revenue from Spain without exposing voters to legal or financial reprisals from the central government.

“We are giving them the chance to turn two million pro-independence voters into two million taxpayers,” Daniel Laspra, the lawyer, said in an interview. “We are putting a gun on the table.”
The tax workaround is the latest salvo in Catalonia’s campaign to create Europe’s newest independent state. After holding the group at arm’s length for almost three years as he pushed for a negotiated settlement with the Spanish state, Mas is beginning to embrace their strategy as he shifts to a more aggressive stance.

Disconnecting Catalonia

With Prime Minister Mariano Rajoy stonewalling his requests for talks, Mas has called a regional vote for Sept. 27 when an alliance of separatist parties will ask Catalans to endorse a road map to independence just weeks before the country faces a general election. The regional government has already started setting up institutions to run its own state, ready to swing into gear if the pro-independence camp wins.

Mas’s plans to “disconnect” Catalonia from the Spanish state pose the biggest challenge to the nation’s territorial integrity since the civil war in the 1930s with potential ramifications for the owners of the country’s 1 trillion euros ($1.1 trillion) of sovereign debt.

The revenue the government raises from the 7.5 million Catalans who make up about 20 percent of the Spanish economy is critical to the state’s ability to fund schools and hospitals, pay pensions and service its debt. The region transfers 8.5 billion euros a year to the rest of Spain, according to a July study for the Spanish Budget Ministry. That’s equivalent to 25 percent of the national budget for interest payments this year.

The Catalan government estimates that the net tax transfer is as much as 16.4 billion euros.

Controlling Taxes

As the decisive vote approaches, Mas is increasing headcount at the regional tax agency by 50 percent this year, adding 170 staff, and its budget will grow 25 percent to 43.9 million euros. In November, the agency set up a facility to receive payments from Catalans via its website.
The regional government is also setting up its own bank, which could manage tax accounts and might be less susceptible than a commercial lender to pressure from the central government to hand over tax revenue, said Laspra, the separatist lawyer. About 80 towns, 1,000 companies, and 2,000 individuals now use the tax workaround, the group estimates.

As a next stage, an association of pro-independence town halls, encompassing about 75 percent of the region’s municipalities, is preparing a campaign to urge more mayors to use mechanism, according to a press officer for the group.

Mas’s separatist ally Oriol Junqueras, who leads the second-biggest group in the regional assembly, Esquerra Republicana, is also pressing the president to officially embrace the escrow-account workaround. Junqueras said he wants Mas to mount his own campaign encouraging voters to pay their levies to the regional government.

Boston Tea Party

“Gaining control over taxes is very important for independence,” Junqueras, who pays his personal taxes to the Catalan government, said in an interview in Barcelona this week.

A press officer for the Spanish Budget Ministry said there was no cause for comment so long as people are operating within the law. If the Catalan government is duplicating structures from other levels of the state it may need to offer an explanation for the extra costs, she added.

Laspra was at a meeting of pro-independence organizations in 2010 with his friends Carme Teixido, who runs a graphic design business on the outskirts of Barcelona, and Josep Maria Bellmunt, a local doctor, when they came up with the idea.

As they discussed protest strategies, the friends took inspiration from the U.S. revolutionaries, who rejected Britain’s right to tax them in the 1770s, famously dumping a consignment of tea into Boston harbor in the run up to the War of Independence.

“We said that since they won’t accept us as Catalan citizens and they won’t accept our statute, we’ll stop paying,” Laspra said. “In the U.S. it all started with taxes.”

(A previous version of this story corrected the spelling of Teixido in the third to last paragraph.)
To contact the reporter on this story: Esteban Duarte in Madrid ateduarterubia@bloomberg.net
To contact the editors responsible for this story: Alan Crawford atacrawford6@bloomberg.net Ben Sills


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