Catalonia hopes to grab billions from Madrid with independence

Protesters hold Esteladas — Catalan separatist flags — during a rally in Madrid. (Reuters)
Updated 21 September 2017
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Catalonia hopes to grab billions from Madrid with independence

BARCELONA: In a glass building overlooking Barcelona’s port, empty desks and computers wait for new workers of Catalonia’s tax agency.
As in other Spanish regions, the agency already collects some taxes on wealth, inheritance, gambling and transport.
But the regional government has spent €18 million (SR81 million) expanding the agency in the hope that it will gain independence from Madrid in an October 1 vote that the Spanish government considers illegal.
From the shiny port office with a 20-year lease, it is hoping to wrestle control of the rest of the region’s finances, claiming billions of euros of income tax and corporate revenue currently going to the Spanish government.
Catalonia has increased the agency’s staff by 75 percent to 700 since January and plans to fill the empty desks by the end of the year if the vote goes through. It has also opened a dozen new regional offices.
This is Catalonia’s most tangible investment in the institutional infrastructure needed for a fledgling state and highlights its government’s determination to secede. It says it will declare independence within 48 hours of a “yes” vote.
It also shows that they are likely to keep pushing for independence, even if they lose the vote.
“In a future transition, it would not be acceptable for them to keep our taxes, because they are ours and they keep a lot,” said Catalan Treasury Secretary Josep Lluis Salvado.
Madrid has declared the vote unconstitutional so there are widespread doubts about whether Catalonia can even stage a credible vote.
It may also not go in the Catalonian government’s favor. Polls show less than half of Catalonia’s 5.5 million voters want self-rule although most want the chance to vote on the issue.
It is also not clear that companies would pay up: Barcelona’s business lobby says no private firms would obey Catalan tax demands unless approved by Madrid.
But the Spanish government appears to be rattled.
On Wednesday police entered the Catalonia tax office as part of a raid on regional government offices, seizing documents and cutting off phone lines, according to a department official. Police also arrested Catalonia’s junior economy minister Josep Maria Jove. It was the latest step in Madrid’s campaign to prevent the referendum from going ahead.
Catalonia’s resolve also worries some investors in Spanish bonds and the tax agency’s expansion suggests an early post-independence flashpoint with Madrid could be a financial one.
Catalonia, with an economy larger than Portugal’s, says it receives an unfair redistribution of tax revenues from Madrid.
Each year, it pays about €10 billion more in taxes to Madrid than it gets back, or around 5 percent of regional economic output, according to data from the Spanish Treasury. In contrast, Spain’s poorest region, Andalusia, receives almost €8 billion more than it pays in.
“The money issue is one of the roots of the problem, the feeling that Catalonia is being ripped off,” said Angel Talavera, a Catalan economist at consultancy Oxford Economics.
If its agency took over all forms of taxation, it would also collect income, company and value-added taxes, bringing total receipts to €42 billion, Salvado said. The agency collected about €3 billion last year, according to a spokeswoman for the Catalan economy and budget department.
To avoid financial collapse, an independent Catalonia would need those tax revenues, economists say. It has €75 billion in public debt, 35 percent of its economic output, one of the highest of all Spain’s regions, and its government bonds are already classified as “junk” by credit rating agencies.
Investors are growing nervous as the referendum nears: the additional yield that Catalan bonds pay over Spanish short-term debt is at close to a nine-month high of about 300 basis points.
The Catalan government last issued a bond in 2012, two years ahead of a previous failed independence referendum. It is not currently considering any bond issues, a spokeswoman said.
Upon a declaration of independence, Salvado said Catalonia would seek to open talks with Madrid to take over all taxation in phases. It would start in October by pocketing €2.5 billion in taxes from about 700 public Catalan firms that currently goes to Madrid.
Later, the agency would collect tax from private firms and individuals. It could take years and the agency would need at least another 4,000 employees, Salvado added.
“The principal challenge is to make sure the taxpayer does not perceive a change,” he said.
Spain’s Treasury has told Catalan businesses that paying taxes to the regional tax agency could constitute a crime. Madrid also took legislative steps last week to prevent the Catalan government from using Spanish public funds to pay for the ballot.
“At the moment companies view it as impossible, they don’t consider it,” Jordi Alberich, director of Barcelona-based business association Cercle d’Economia, told Reuters.
The Catalan government also lacks the database needed to correctly collect personal income and company taxes, according to Carlos Cruzado, the head of the Spanish Treasury’s workers union.
Salvado said the agency had sufficient data on taxpayers’ inheritance and wealth taxes to make a start on taking over other forms of taxation, but they would seek to negotiate access to Spain’s historical tax records.
He did not expect a positive response. “The Spanish state is going to use its preferred word — ‘No’.”


Twitter suspended 58 million accounts in 2017 fourth quarter

Updated 2 min 19 sec ago
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Twitter suspended 58 million accounts in 2017 fourth quarter

NEW YORK: Twitter suspended at least 58 million user accounts in the final three months of 2017, according to data obtained by The Associated Press. The figure highlights the company’s newly aggressive stance against malicious or suspicious accounts in the wake of Russian disinformation efforts during the 2016 US presidential campaign.
Last week, Twitter confirmed a Washington Post report that it had suspended 70 million accounts in May and June. The cavalcade of suspensions has raised questions as to whether the crackdown could affect Twitter’s user growth and whether the company should have warned investors earlier. The company has been struggling with user growth compared to rivals like Instagram and Facebook.
The number of suspended accounts originated with Twitter’s “firehose,” a data stream it makes available to academics, companies and others willing to pay for it.
The new figure sheds light on Twitter’s attempt to improve “information quality” on its service, its term for countering fake accounts, bots, disinformation and other malicious occurrences. Such activity was rampant on Twitter and other social-media networks during the 2016 campaign, much of it originating with the Internet Research Agency, a since-shuttered Russian “troll farm” implicated in election-disruption efforts by the US special counsel and congressional investigations.
Suspensions surged over the fourth quarter. Twitter suspended roughly 15 million accounts last October. That number jumped by two-thirds to more than 25 million in December.
Twitter declined to comment on the data. But its executives have said that efforts to clean up the platform are a priority, while acknowledging that its crackdown has affected and may continue to affect user numbers.
Twitter said in April it had 336 million monthly active users, which it defines as accounts that have logged in at least once during the previous 30 days. The suspended accounts do not appear to have made a large dent in this number, which was up 3 percent from a year earlier. Twitter maintains that most of the suspended accounts had been dormant for at least a month, and thus weren’t included in its active user numbers.
Michael Pachter, a stock analyst with Wedbush Securities, said he thinks the purge late last year may have been part of an initial sweep of inactive accounts that had little effect on activity or advertising revenue. But he said he expected advertising revenue to fall 1 to 2 percent due to the more recent purge last week, when Twitter said it was removing frozen accounts from follower counts.
He expects the company to be upfront about the impact when it announces quarterly earnings on July 27, and said the cleanup is good for users and advertisers. “They’re certainly doing the right thing,” he said.
Scott Kessler, an analyst with CFRA who has a “sell” rating on Twitter stock, said multiple reports and vague clarifications by executives are creating uncertainty about what Twitter’s numbers really mean.
The purge activity “adds a level of uncertainty,” he said. “As an analyst, I want a more genuine view of the user base.”
Chief Financial Officer Ned Segal said in February that some of the company’s “information quality efforts” that include removing accounts could affect monthly user figures. Segal offered no specifics.
Six months later, in late June, Twitter disclosed that its systems found nearly 10 million “potentially spammy or automated accounts per week” in the month of May, and 6.4 million per week in December 2017. That’s up from 3.2 million per week in September. The company didn’t say how many of these identified accounts were actually suspended.
Following the Post report, which caused Twitter’s stock to drop sharply, Segal took to Twitter to reassure investors that this number didn’t count in the company’s user metrics. “If we removed 70M accounts from our reported metrics, you would hear directly from us,” he tweeted last Monday .
Shares recovered somewhat after that tweet. The stock has largely been on an upswing lately, and more than doubled its value in the past year.
Twitter is taking other steps besides account deletions to combat misuse of its service, working to rein in hate and abuse even as it tries to stay true to its roots as a bastion of free expression. Last fall, it vowed to crack down on hate speech and sexual harassment and CEO Jack Dorsey echoed the concerns of critics who said the company hasn’t done enough to curb such abuse. – AP