On the Basque and Navarrese Foral Financing System: notes for a necessary debate

This paper contains a critical analysis of the design and functioning of the so called foral financing system applied in the Basque Country and Navarre, with special attention to the determination of these regions' contribution to national finances and their shares in indirect taxes. It also advances some proposals to solve the detected problems and to increase the system's transparency. The study shows that some of the variables that play a key role in the relevant calculations are defined and/or measured in incorrect ways that generally tend to introduce a downward bias in these regions' net contributions to the national purse.