Basque Economic Agreement

The Economic Agreement is a juridical instrument that regulates the taxation and financial relations between the General Administration of the Kingdom of Spain and the Autonomous Community of the Basque Country.

The origin of the Economic Agreement lay in the Third Carlist War defeat of 1876, with 40.000 Spanish troops occupying the Basque Provinces, and held under martial law. There was a need to reach an agreement of some type by which the Basque Provinces (Álava, Gipuzkoa and Biscay) would pay taxes to the State following the approval of the Law of July 21, 1876, which obliged the citizens of "these provinces to pay taxes according to their means, in the same way as other Spaniards," as put by the fueros abolition law pushed by the Spanish premier Canovas del Castillo.

The process of discussing this obligation was a highly complex one, due to these provinces having their own Fueros, of the or territorial statutes, and their own bodies for provincial representation (the Juntas Generales or "Representative Assemblies") which regulated their own internal tax systems, which derived from their Fueros (Charters).

Following fruitless contacts between Antonio Cánovas del Castillo, President of the Government, and the representatives of the Chartered Councils (Diputaciones Forales - the specific Basque governments), the former dissolved the Juntas Generales (the assemblies) and the Chartered Council of Biscay. Between late November and early December 1877, he did the same with the Chartered Councils of Álava and Gipuzkoa.

However, the immediate problem was how to collect taxes in provinces where there had been only scarce activity by the State Treasury (since 1841 only the collection of Customs duties had been of any importance). This led to Antonio Cánovas negotiating with the Government-appointed Provincial Councils over the form in which these provinces would enter the "Economic Agreement" of the Nation.

Between December 1877 and February 1878 the representatives of the Provincial Councils and the Government attempted to reach an agreement. This took the form of a first Decree, dated February 28, 1878, by which the provinces would pay taxes to the State in a specific manner for a transitional period of eight years. The Provincial Councils were to be responsible for collecting the agreed taxes (impuestos concertados); they would then pay the State Treasury the equivalent of what the latter calculated it could collect, while employing for their own expenses the difference between the sum collected and the sum paid to the State Treasury through the Quota.

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Wikipedia