Madrid’s Tax Position Reinforced by New IACF Findings
For a third consecutive year Spain registers the lowest tax burden in the Autonomous Financial Competitiveness Index (IACF), a report prepared by the Freedom Development Foundation. The latest edition, released this Tuesday, highlights how the Community of Madrid leads in fiscal responsibility and competitiveness across regions.
The Madrid government explains in a statement that the IACF analyzes regional fiscal policy through more than 60 indicators. These indicators include personal income tax, inheritance and donations, transfer duties for inheritance, and the governance of autonomous taxes managed within the region. Since the index began in 2017, Madrid has consistently ranked as the most developed autonomous community, maintaining a sustained leadership position.
Javier Fernández-Lasquetty, the regional minister responsible for Economy, Finance and Employment, emphasized the value of the IACF in guiding reforms that make tax systems clearer and more respectful of taxpayers while also keeping Madrid attractive to corporations and individual investors. He highlighted Madrid’s ongoing appeal to foreign taxpayers as a stable, long-term destination for investment over the past three years, praising the alignment with a broader plan for economic growth.
According to the IACF, the next most competitive communities after Madrid are the Basque Country, Navarre, and the Canary Islands. In contrast, Catalonia, the Community of Valencia, Aragon, Asturias, and Extremadura trail behind in this measure. The minister attributes Madrid’s strong standing to a long period of stable or reduced taxation, which has redirected a larger share of resources back to residents while supporting public services and essential governance capacity.
The IACF notes that Madrid has been the leading economy in Spain since 2018, contributing about 19.3 percent of the national GDP. The framework also points out that tax relief in Madrid has helped protect taxpayer purchasing power, with an average saving of around 17,620 euros per taxpayer. This fiscal pathway has coincided with the delivery of high-quality public services, reinforcing the region’s reputation for effective governance and economic resilience.
Greater Wealth Creation, Public Finances Strengthened, and Job Growth
Fernández-Lasquetty argues that repeated tax reductions have yielded tangible benefits, particularly for lower-income households. These measures have stimulated economic activity, expanded wealth creation, and generated more employment opportunities. As a result, overall tax revenue has continued to rise, reflecting a healthier fiscal balance rather than a shrinkage of public resources.
As the region furthers its fiscal strategy, Madrid remains the region that makes the largest contribution to solidarity and the financing of essential public services. The minister notes that these policies have sparked a domino effect, encouraging other autonomous communities to consider similar tax incentives, irrespective of political leadership.
In this vein, attention turns to ongoing shifts in tax policy across Spain. The announcement of the wealth tax abolition in Andalusia, the tax reliefs in Galicia, and the reductions in personal income tax seen in Murcia, Castilla y León, the Community of Valencia, and the Basque Country are cited as examples of a broader national trend. The Madrid administration views these developments as a signal of how tax policy can influence regional competitiveness while supporting social cohesion and long-term fiscal health.
Overall, the IACF positions Madrid not merely as a regional leader but as a case study in how prudent tax policy can align with stronger economic fundamentals. The data suggest a link between tax relief, investment, and the expansion of the regional economy, with a positive effect on public service delivery and regional development.
As policymakers examine the pathway forward, the emphasis remains on maintaining a balance between tax simplicity, competitive rates, and robust public services. The IACF serves as a benchmark for evaluating how fiscal choices translate into real economic outcomes for residents and businesses alike, reinforcing Madrid’s role as a catalyst for broader financial stability within Spain.