MINISTERIO DE HACIENDA Y ADMINISTRACIONES PÚBLICAS

The Ministry of the Treasury is the department of the General State Administration responsible for proposing and executing the general directives and measures of the economic policy of the government and, especially, the policy relating to inland revenue, budgets and expenditure and public companies. It was created by Royal Decree 553/2004, of 17 April 2004 (Official Gazette of the State of 18 April 2004), and its organic structure has been developed by Royal Decrees 1552/2004, of 25 June 2004 (Official Gazette of the State of 26); 120/2005, of 4 February 2005 (Official Gazette of the State of 5 February 2005); 756/2005, of 24 June 2005 (Official Gazette of the State of 25 June 2005) and 288/2006, of 10 March 2006 (Official Gazette of the State of 14 March 2006).

Its present configuration is the result of a long historical process of adaptation of our institutions to the socio-political and economic reality of our country. It is a modern, dynamic body that looks to the future thanks to the huge experience that it has accumulated between 1705 and today. For this, it has had to face numerous reorganisations that have led to the merger of two pre-existing ministerial portfolios: Taxation, with a long tradition in Spanish ministerial organisation, and Economy, which emerged in response to the needs derived from adverse economic national and international contexts. The following are just a few snippets from its long history.

The Ministry of the Finance was created by the Bourbon administration in the 18th Century. It came as an attempt to solve the serious crisis into which the financial system of the Crown had been plunged during the reign of the House of Austria, and was also conceived as an instrument for the centralisation of the former Spanish kingdoms.

The traditional system of the Royal Treasury was based on a series of independent organisations for the crowns of Castile and Aragon. The former had its Treasury Council, created in 1523, albeit heavily reformed in 1658;the Major Accounting Office, created in 1476; and the General Superintendency of the Treasury, created in 1687. The Crown of Aragon had the following institutions:the Baile General and the Maestre Racional de la Corte. In both cases, and during the 16th and 17th Centuries, there was one for each one of the kingdoms of the Aragonese Crown.

The Ministry of the Treasury in the 30s

Following the War of Spanish Succession, the Catalan and Aragonese institutions were suppressed between 1707 and 1716, and their powers were absorbed by the Castilian institutions. Thus, it may be said that the traditional tax-collecting institutions remaining at the beginning of the 18th Century were Castilian: Council, Accounting and Superintendency.

However, neither did the traditional Castilian model work properly, due to its very organisational structure and to the serious plight of income in Castile. Many tenancies had been leased to private individuals in the course of the 17th Century, thus reducing income to the treasury.

In 1705, two Secretariats of the so-called Universal Office were set up: one for War and Treasury affairs and another for matters concerning the Monarchy. This was the embryo of the current system of Government.

In 1714 the number of Secretariats was expanded to five: State, Ecclesiastic Affairs, Justice and Jurisdiction of the Councils; War; the Indies; the Navy and the Treasury. The first four were managed by a Secretary of State and of the Office, whereas the Treasury was controlled by the Universal Intendant of the Veeduría General (early name for the post now known as the Minister of the Treasury). This division was short-lived, and disappeared in 1716. As of that moment, the affairs of the Treasury were bound to those of Justice and the Indies.

The social and political reforms undertaken during the 18th Century required a solid financial system, incompatible with the Crown's tenancy leasing system, as they also required a suitable bureaucratic mechanism. Thus began a long road which lasted practically until the end of the century.

The reign of Ferdinand VI witnessed the beginning of a long process of recovery of direct administration of the main incomes and taxes, and Public Finance assets were thus restored. This led to the definitive creation, in 1754, of the State Secretariat and the Universal Office of the Treasury as the organ entrusted with the administration and control of the Crown's income in the Peninsula. The overseas possessions Treasury was held at that time by the State Secretariat and Office of the Indies.

The Decree of 1754 created a strong bureaucratic apparatus. The State Secretariat, as managing organ, coexisted with the organisations that had been inherited from the Austrian monarchy. The second most important of all these was the General Superintendency of the Royal Treasury, an organ to which the Board of General Income - the organ that administered the most productive income of Castile, reported: customs duties and those derived from the Tobacco, Salt and Lead levies , among others.

All these organisations were, to a certain extent, independent from each other, to the extent that the general boards of the time operated largely in the same way that the autonomous entities do nowadays. Organic subordination barely existed.

Any conflicts of power that arose between the State Secretariat and the Superintendency of Finance were solved by making the same person head of both of them: the Secretary of State. Nevertheless, they are strong organs. Good proof of this is that palaces were built in the Crown's main cities to accommodate their employees.

This situation accounts for the building of the Customs of Valencia (now the Higher Court of Justice of the Community of Valencia), Barcelona, Malaga and Madrid, now the headquarters of the Ministry of Finance. These were all major architectural projects undertaken during the reign of Ferdinand VI, Charles III and Charles IV.

Children of the School of Orphans of the Ministry of Finance (1927)

As of 1754 the Directorate for General Revenue was profiled as the organ entrusted with controlling the main taxes and incomes. Basically, the income from the Customs and the provinces.

This Board, driven by the Marquis de Ensenada, Secretary of State for the Treasury, promoted the creation of a General Land Registry for Castile, whose mission was to reduce the numerous direct taxes and scant direct taxes to a single tax: The single tax, which had previously been levied in the territories of the former Crown of Aragon during the reign of Phillip V. While the project actually failed, it nevertheless laid the foundations for a programme that would be followed by subsequent ministers.

During the reign of Charles IV, economic crisis shook Spain, aggravated by political instability in Europe in the aftermath of the French Revolution. This was immediately mirrored in the organisation of the Administration: in 1790, the State Secretariat and Universal Office of the Indies disappeared . American tax affairs were taken over by the Ministry of Finance, and as of that moment, until 1836,  barring certain spells, there were two public finance areas in the same Department: Spain and the Indies.

A period of warring strife affecting Spain began in 1793, and was not curbed until 1845. It had an immediate and catastrophic impact on the Crown's financial system, and was aggravated by the independence of the American possessions. This was to last until the end of the 19th Century. The lack of resources led to a growth in the National Debt and the adoption of different measures to pay it:

• Issue of Royal IOUs.
• Consolidation of the national debt in the reign of Ferdinand VII to avoid bankruptcy.
• Use of an extraordinary resource, namely borrowing, as a form of obtaining credit.
• Establishment of a credit and fiduciary policy to support the Public Treasury, culminating in the constitution of the Bank of Spain.
• Beginning of a disendowment policy beginning in the reign of Charles IV, culminating in 1835 under the Ministry of Mendizábal, and which was succeeded, with less distinction, by the policy undertaken by Madoz twenty years later.
• Consolidation of the Debt and adoption of a budgetary system to control debt, inspired by Martín de Garay and consolidated as of López-Ballesteros in 1827.

Building of an extension to the Ministry of Finance(1943/44)

The foregoing has its organic reflection. In 1795 the Superintendency of Treasury was suppressed, and its functions were taken over by the State Secretariat and of the Office. Two Ministries of Finance coexisted between 1808 and 1814, one "French-style" and the other Bourbon. Both undertook actions that would prosper   in the course of the 19th Century.

Ferdinand VII brought about the restructuring of the Secretariat in 1816 and 1824, with a view to developing an instrument that would be capable of saving the Public Finance from the catastrophic situation spawned by the war. The reform of 1824 saw the emergence of the General Directorate of Public Finance as the organ responsible for the redistribution of public funds.

In 1834 the General Administration of the State was restructured. A clear division was established between the legal and the eminently administrative powers. The councils were suppressed and replaced by the higher courts of Justice. The State Secretariats were restructured on the basis of an Under-Secretariat as the basic administrative organ, with different general boards as technical and administrative organs. These bodies would be independent when establishing their objectives and interests.

In 1836, the offices of the Treasury of the Indies were dissolved. This moment witnessed the emergence of the General Directorate of Amortisation - a remote   forerunner of what is now the General Directorate of State Heritage- to administer the new heritage acquired by the State via the confiscation of ecclesiastic assets.

The unstoppable constitutionalist process that took place during the reign of Isabella II imperatively called for a streamlined public finance as a basic instrument for the creation of wealth and to afford the burgeoning middle class political stability. The rise to power of the moderate party brought with it the tax reform of 1845, due to the resolute personal drive of the State Secretariat and of the Office, Alejandro Mon.

The tax reform heralded the end of the complex tax system of the Old Regime, thanks to a process of simplification which for the first time ever afforded importance to direct taxes and reduced indirect ones. Thus was born a treasury model driven by ongoing reform. The Ministry of Finance is an organic and utterly dynamic entity which adapts, with increasingly greater ease, to situations prevailing at all times.

The Mon reform established a new organic structure to adapt its apparatus to the new circumstances. The Department was also relocated to its current site: the Royal Customs building and the Office of General Income. This was due to the need to centralise and unite the Secretariat and the general directorates of Revenue and Finance which, as has already been mentioned, enjoyed a great degree of independence.

If Mon was the instigator of a contemporary Ministry of Finance from the standpoint of tax techniques and law, Bravo Murillo, the Minister of Finance in 1849 and 1850, was also a cornerstone of the General State Administration.

Puerta del Sol (1852)

Indeed, the leadership of Bravo Murillo witnessed the conception of the Accounting Law of 1850.He established the term Ministry to replace the classic name of State Secretariat and of the Office. He organised the Department around a modern bureaucratic model. The authority of the Minister over the director generals was reinforced. He also consolidated, as classic organs of the public Treasury, the general boards of Direct and Indirect Taxation, Accounting- a forerunner of the modern General State Comptroller-, of Debt and also of the Contentious.

Moreover, Bravo Murillo also fostered the creation of the Government Depositary, an instrument initially designed to make the State more independent from the banks in securing new loans. Although in the end it did not have the expected effects.

His ministry addressed all the aspects needed for the correct administration and defence of the nation's tax resources. Bravo Murillo's organic and bureaucratic reforms lasted practically for the rest of the 19th Century. Nevertheless, he was not so successful in terms of provincial organisation - between 1849 and 1881 the provincial Finances were deprived of a necessary organisational independence, nor in the purely public finance aspect.

The development of the country, and the need to extricate it once and for all from the financial crises in the course of the 19th Century brought new economic and tax reforms driven by the ministers Figuerola (1869), Navarro Reverter (1895) and Fernández Villaverde (1902-1903). This, bound to the culmination of the coding process in Spain, impacted the new organic reforms of the Public Finance and the beginning of the consolidation of a new bureaucratic structure.

The General State Comptroller was institutionalised between 1873 and 1878. In 1881, the State Lawyer Corps was created, while the economic-administrative procedure was consolidated in administrative and legal planning. In this same year the General Inspection of the Public Finances was instituted as an instrument for the improvement of the provincial economic management. The immediate effect was the creation of Finance Branches.

Between 1902 and 1903 an administrative structure that was ideal for the tax reform planned by Fernández Villaverde was adopted. Moreover, each general directorate was regulated by its own specific rules and regulations. In 1906, the enactment of the Law of the Plot Land Registry of Spain, promoted by the Minister Moret with the help of José Echegaray as president of the Committee that drafted the Bill, heralded further progress in the consolidation of a direct contribution system. In 1911, the Law of the Administration and Accounting of the Treasury was passed, the backbone of the whole system of budget and public expenditure control.

International Eucharistic Congress(1911)

The administrative structure of 1902-1903 remained practically the same until 1957. In the course of this period, attention should be drawn to the suppression of the Ministry of Finance between 1923 and 1925, due to the structure implemented by the Military Directory presided by Primo de Rivera.

Other organic reforms were also undertaken during the Second Republic, including the creation of the Central Economic and Administrative Court for Tax and Economic Appeals. Nevertheless, this whole period is eclipsed by the tragedy of the Civil War between 1936 and 1939.

Official dinner for President Azaña in the basement of the Ministry of Finance (1937)

Italian prisoners in the basements of the Ministry of Finance (1937)

Constitution of the National Defence Council (1939)

During the war, the Public Finance became the instrument needed to collect money to win the war. The Republicans created the Ministry of Finance and Economy in 1937. The national side created different organisations -national services and committees - from 1936 onwards as it needed them. They were all grouped together into the Finance Commission in 1936. The latter became the Ministry of Finance in 1938.

At the end of the war there was a reshuffle in the Francoist administration. The services that were part of each one of the ministries recovered the name of general board. The organic structure of 1902-1903 was also reestablished.

In 1957, the need to do away with economic autocracy and offload an obsolete bureaucratic organisation greatly affected by the war gave rise to upheavals in the Ministry. In this selfsame year a reform of the administration was undertaken that consolidates the way there Government operated and the figure of the Technical General Secretariats.

Administrative Information Office (60s)

1957 was also the year of a new tax reform that opened up the way to increase the national income and pull the country out of the economic situation it had languished in since the Civil War. This reform required a modern, simplified and efficacious Treasury. In 1959 an Under-Secretariat of Finance and Public Expenditure was created to control the State's financial resources and to draw up the Budget. This was also the time of the introduction of the automation of processes in the administration, the forerunner of tax computing. Tax study and information services were fostered.

Registry of Sales and Heritage (1965)

As a result of the stabilisation plan promoted by the Minister Mariano Navarro Rubio, the period between 1963 and 1964 saw the culmination of the processes of public finance reform with the enactment of the General Taxation and of Tax System Reform laws. New taxes were systematised (business tax and trade). Above all this entailed a reform of the technical bodies of the Treasury, to afford them even greater specialisation in the new taxation system. The economic austerity plan of 1967 brought new reforms, and the structure of the Ministry was simplified when the Under-Secretary of the Treasury and Public Expenditure was suppressed.

Data recording. The beginning of tax computing (1967)

1968 heralded the beginning of a process of constant renovation. The 70s brought the technification of the Finance Administration. The cornerstones of the current Ministry of Finance  were laid between 1973 and 1976. The tax reform projects of these years and the enactment of the General Budget Law and the Law on Urgent Measures of Tax Reform, in 1977, protected the future Constitution of 1978. The departments of Economy and Taxation merged in 1982, to separate temporarily between 2000 and 2004.

Personal Income Tax Campaign (80s)

The State Tax Administration Agency, the public organisation which manages the state tax and customs system and the resources of other national or European Union Administrations and Public Bodies, saw the light in 1992. Its creation entailed the harmonisation of the organisation of tax activity with practices applied in the rest of the world.

This emerged in light of the need to foster an autarkic economic policy by the dictatorship of Primo de Rivera in view of the weaknesses and shortcomings of the Spanish industrial and commercial framework compared with the other European and American economic powers. The complexity of the international markets after the First World War had plunged Spain into a serious industrial crisis.

The sectors affected by the industrial crisis demanded a protectionist customs tariff policy that would defend national production against foreign production and that would, in turn, help with exports. So began an autarkic policy based on economic nationalism and on customs tariff protectionism, the best example of which was the “1922 Cambó Tariff”. This was undertaken by the Primo de Rivera dictatorship, achieving a level of economic boom that was cut short by the Great Depression of 1929.

The Cambó Tariff was the technical and fiscal response to the critical deficit of the country’s balance of trade after 1920. This is a tariff policy that deals with two opposing needs: one is to protect the different sectors in the Spanish economy from the international economy, with heavy taxation on imported products produced by equivalent foreign sectors; the other deals with the need to defend export agriculture, a sector with an extensive foreign market and which is harmed by the rise in tariffs, a victim of the subsequent rises of the countries affected by the Spanish measures. This was resolved with the signing of international Trade and Shipping treaties that agreed a specific and significant reduction to the tariff with each foreign nation with whom trade exchanges were carried out. Flores de Lemus lucidly defined the situation that had been created: there was a complementarity between export agriculture and agriculture and industries that needed protecting, although the instruments employed by the State went against this, resulting in continuous tension between them.

Although distant forerunners of the Economy portfolio can be found in the creation of the Ministry of Supplies as an immediate consequence of the 1917 crisis, the first step towards the creation of a specific Department came about during the Primo de Rivera Dictatorship when the Council for the National Economy was constituted by Royal Decree-Law, of 8 March 1924.

The Council was created to study the problems of national production and consumption in order to set customs tariffs and to determine the way of establishing international trade relationships in line with the Spanish economic reality. For this, its primary functions were to gather statistics on external and inter-coastal trade, obtain economic and trade information in Spain and abroad, establish the official evaluation of goods, taking into account their costs, propose new customs tariffs and the revision of nomenclatures and tariffs. It was also responsible for proposing entering into Trade Treaties. Finally, this agency would serve to control all the country’s pressure groups and so channel their opposing interests: boards and chambers of Commerce, Industry and Shipping, producers’ association, employers’ organisations and trades unions of all kinds.

The Council was attached to the Prime Minister’s Office, with its chairman being the Head of the Government – the then Chairman of the Directorate – and in the absence of the latter, the Minister of the Economy – a post which was at that time suspended. However, the different sub-secretariats continued to maintain their authority in this field: State, Taxation, Public Works and Employment, Trade and Industry; which to a some extent took away the efficacy of the new agency’s functions.

The end of the Directorate in 1925, the re-establishment of the ministerial system and circumstances led to the creation of the Ministry for National Economy by Royal Decree, of 3 November 1928 (Gazette of 4 November 1928), in response to public opinion which demanded that the services that affected the national economy be put under a single department, both in terms of production and trade and consumption and which until then were divided among the other ministerial Departments. Reporting to it was the Council for the National Economy, although slightly modified, continuing with its work of gathering and comparing the realities of the country with regard to each sector of its economic life. It also comprised the following agencies:

• The Ministry of Public Works transferred the Directorate General of Agriculture, with the chambers of agriculture, agriculture council and cattle-raisers’ association and livestock hygiene and health services.
• The Presidency of the Council of Ministers transferred the Council for the National Economy and Directorate General of Tariffs and Evaluations, the chairman of which was the deputy chairman of the above Council.
• The branches of Trade and Supplies were transferred from the Ministries of Employment and Government to form a single Directorate General for Trade and Supplies.
• The Ministry of Employment, the Directorate General for Industry with the School of Industrial Engineers, we well as provincial inspections.

During this time, its headquarters were in the same building as the Ministry of Public Works, today the headquarters of Agriculture, Fisheries and Food, with the exception of the Council for the National Economy which was at Calle Magdalena, 12.

The Ministry disappeared by Decree of 16 December 1931. Its services were divided between the Ministry of Agriculture, Industry and Trade, and the Ministry of Public Works and Employment. The Council for the National Economy became the ruling Council for the National Economy, reporting to the portfolio of Industry and Trade.

As already stated in the section on the Ministry of Taxation, the Republican Government created a Ministry of the Treasury during the Spanish Civil War, based  first in Barcelona and then in Valencia. The chairman of the new institution was Juan Negrín, who in turn held the Chair of the Council of Ministers. Its creation was ordered by Decree of 17 May 1937 and its functions and structure were given by Decree of 27 May 1937.

The new portfolio was created in response to the need to unify the government’s economic policy in wartime and so put an end to the diverse and at times contradictory direction that had happened in the regulation of economic affairs and especially to coordinate international commercial transactions with that of the payment systems used, so defending the interests of the Treasury. The Ministry was structured around two sub-secretariats, one for Taxation and one for Economy. The latter comprised the directorate generals of Economy, Supplies, Trade and Mining.

The specific existence of an Economy portfolio was interrupted in 1939. However, throughout the whole of the Franco era, a series of agencies were to emerge that would lead to the new creation of the Ministry of the Economy in 1977 as part of the remodelling of the General State Administration needed to bring about the political Transition.

The catastrophic situation into which Spain was plunged after the Civil War and the collapse of the international markets caused by the Second World War led to the creation of a new Council for the National Economy.

The new agency ensured that all the ministerial departments followed the government’s economic directives in a harmonious and coordinated fashion. Its legal system constituted it as an autonomous work, consultation, advisory and technical agency in all matters affecting the national economy, and it reported directly to the Prime Minister’s Office. The importance of the Council would steadily increase, so much so that institutionally its chairman would be on a level with those of Las Cortes, the Supreme Court of Justice, the Court of Auditors of the Kingdom and the Council of State. Its power and influence in matters of the economy, geared at all times towards autarky, would be equal to that of the Secretariat General of the Movimiento (single ruling party). Finally, the Chairman held the rank of Minister without portfolio.

Its link to the more ultraconservative sector of the regime in matters of the economy would signify the beginnings of its decline. In open confrontation with the Ministry of Taxation and the Ministry of Trade at the shift that the Stabilisation Plan had taken towards a capitalist economy, the Council for the National Economy gradually began to lose importance in the 1960s and finally disappeared in 1977, absorbed by the new Ministry of the Economy.

Other agencies connected with state control of economic development, and which are regarded as distant forerunners of the Ministry of the Economy, were the Office for Economic Coordination and Planning (OCYPE), which worked between 1957 and 1962, and the Commission for the Economic Development Plan, which worked between 1962 and 1973. Both agencies reported to the Prime Minister’s Office. In 1973, the Development Planning Ministry was created.

During the governments of Arias Navarro a Deputy Prime Minister’s Office for economic affairs was created, and the post fell on the holder of the Taxation portfolio. The new post meant the disappearance of the Development Planning Ministry, leaving its sub-secretariat attached to the Delegate Government Commission for Economic Affairs

The new creation of the Ministry of the Economy in 1977 took place amid hugely significant circumstances for the history of Spain.

With the political Transition underway, the second Government headed by Suárez was aware that the constitutional process would be seriously hindered if there were no economic growth. Circumstances were completely contrary given the serious situation that the country found itself in due to the 1973 oil crisis, the ineffectiveness of the measures adopted by the later governments of the Dictatorship; and the accentuation of latent problems: inflation, unemployment, external deficit, public sector deficit and a lack of investments.

The institutional solutions meant the remodelling of the General State Administration which led to the creation of the Second Deputy Prime Minister’s Office for economic matters and the post of Ministry for the Economy through a series of royal decrees passed on 4 April 1977, appointments that fell to Fuentes Quintana. The Ministry for the Economy enabled the creation of the necessary agency to bring the different authorities regarding economic organisation and planning into a single department and to singularise the decisions on economic policy, partly removing them from the Ministry of Taxation. Its main aim was to establish the guidelines of the general economic policy, short- and medium-term planning and to study the proposal of advisable measures to ensure the good development of the Spanish economy.

As well as creating the Second Deputy Prime Minister’s Office, and joining both posts together in a single one, it reinforced the authority of the new Ministry, as its head became the chairman of the Delegate Government Commission for Economic Affairs, in the absence of an incumbent, and as delegated by the Prime Minister. The task of the Deputy Prime Minister’s Office and the Ministry, together with that of the Taxation portfolio, formed the basis of the Moncloa pacts as an instrument for the necessary economic planning with which to uphold the transition policy and ensure the future of the constitutional process. During Suárez’s last term, the Economy and Trade portfolios were merged into one.

The administrative reforms carried out by the first government under Felipe González led in 1982 to the merger into one body of the department of Taxation and the department of Economy and Trade, leading to the creation of the Ministry of the Treasury. This agency has been in continuous operation, with the exception of the seventh legislature, under Prime Minister José María Aznar, when the portfolios of Taxation and Economy were split into two, as stated above.