1. Constitutional Foundation

The Spanish model is based on original vs. derivative financial power.

A. Theory of Original State Sovereignty - Art. 133.1 CE

"La potestad originaria para establecer tributos corresponde exclusivamente al Estado, mediante ley"

This is the core of Spanish financial sovereignty. The State has potestad tributaria originaria. This means:

1. Only the State can create a tax system from nothing.
2. It must be done by Law passed by Cortes Generales - principle of reserva de ley tributaria - Art. 31.3 and 133 CE.
3. It is an expression of national sovereignty Art. 1.2 CE: sovereignty resides in the Spanish people.

B. Theory of Derivative and Limited Autonomy - Art. 133.2, 156, 157 CE
Autonomous Communities and Local Corporations have only derivative power:

• Art. 133.2 CE: CCAA and local corporations may establish and demand taxes in accordance with the Constitution and the laws.
• Art. 156.1 CE: "Las Comunidades Autónomas gozarán de autonomía financiera para el desarrollo y ejecución de sus competencias con arreglo a los principios de coordinación con la Hacienda estatal y de solidaridad entre todos los españoles"
• Art. 157 CE lists their resources: own taxes, surcharges, ceded taxes, transfers from state, etc. Developed by LOFCA - Ley Orgánica 8/1980 de Financiación de las Comunidades Autónomas.

This creates the Spanish model of Fiscal Federalism Asymmetric: State is sovereign, CCAA are autonomous but coordinated.

C. Theory of Budgetary Sovereignty and European Integration - Art. 135 CE

This is the most modern layer. Reformed in two key moments:

• 1992: to allow Maastricht Treaty.
• 27 September 2011: to constitutionalize budgetary stability after the sovereign debt crisis.

New Art. 135 CE states:

1. All Public Administrations will conform to principle of budgetary stability.
2. The State and CCAA cannot incur a structural deficit exceeding limits set by EU.
3. Public debt volume cannot exceed EU reference value.
4. Developed by Ley Orgánica 2/2012 de Estabilidad Presupuestaria y Sostenibilidad Financiera.

This is the theory of Shared / Pooled Sovereignty: Spain voluntarily limits its financial sovereignty to EU to preserve overall sovereignty. This was controversial because it was approved in 2 weeks with agreement of PSOE and PP, without referendum.

D. Theory of Tax Justice as limit to sovereignty - Art. 31.1 CE

"Todos contribuirán al sostenimiento de los gastos públicos de acuerdo con su capacidad económica mediante un sistema tributario justo inspirado en los principios de igualdad y progresividad que, en ningún caso, tendrá alcance confiscatorio."

The Tribunal Constitucional says tax power is not absolute, it must respect capacidad económica, igualdad, progresividad, no confiscatoriedad.

2. Detailed Case Laws of Tribunal Constitucional

1. On limits of State vs CCAA tax power - Doctrine of "Hecho Imponible"

STC 37/1987, de 26 de marzo - First LOFCA Case:
Doctrine: Art. 6.2 LOFCA prohibits CCAA taxing a materia imponible already taxed by State, but not the same hecho imponible. The Court gave wide room to CCAA. CCAA can tax different aspects of same wealth.

STC 289/2000 and STC 168/2004 - Extremadura and other ECOTAX:
The Court annulled Extremadura tax on facilities impacting environment because in fact it was taxing same income as State's corporate tax. Established test of identity of taxable event.

STC 122/2012 and STC 196/2012 - Tax on Bank Deposits:
Catalan and Andalusian taxes on bank deposits declared unconstitutional because State later created same tax (Art. 19 Law 16/2012). The Court said: State has preference. LOFCA Art. 6.2 gives preference to State when establishing taxable situations. State can, when exercising original power, establish taxes on taxable events already taxed by CCAA.

Information Note 18/2015 - Catalonian Deposit Tax Cases (STC 107/2015):
Tribunal upheld State tax and rejected Catalan claim that State tax lacked legitimate purpose. Confirms vertical financial hierarchy.

2. On Financial Autonomy vs Coordination

STC 13/1992: Principle of financial autonomy is compatible with State conditioning grants. But State cannot use spending power to empty CCAA competences.

STC 134/2011 - Budgetary Stability Law 18/2001:
Just before Art. 135 reform, TC ratified constitutionality of budget stability legislation in its entirety. Said State interference in financial autonomy via stability controls is legitimate under Art. 149.1.13 (general economic planning) and 149.1.14 (General Treasury). This paved way for 2011 reform.

STC 31/2010 - Estatut de Catalunya:
Key on financial sovereignty. TC declared unconstitutional the provision that Catalonia's contribution to solidarity would be based on bilateral negotiation. Said: "Only the State may establish the fiscal effort each community must make". This protects financial autonomy of other CCAA and principle of solidarity. Struck down attempt to create fiscal sovereignty for Catalonia.

3. On Art. 135 and Coercive Measures - Art. 155 CE

• STC 215/2014 of 18 December 2014:
  TC rejected claim against some norms of Law 2/2012 of financial stability and fiscal sustainability (LOEPSF), recalling relevant Union law. Upheld State's power to impose sanctions, retention of financing, and ultimately application of Art. 155 coercive measures if CCAA breaches stability. Said it "clearly interfered with financial independence of Autonomous Communities, but this interference was allowed by the Constitution itself, as ultimate reaction to blatant non-compliance". Doctrine: Financial autonomy is not sovereignty; it is autonomy within Constitution.

4. On Recent Solidarity Taxes and Confiscation

STC 125/2021:
TC rejected notion that principle of equality is violated simply because different taxes exist in different parts of territory. Financial autonomy allows tax diversity. Important for Madrid vs other regions.

STC 149/2023 - Impuesto Temporal de Solidaridad de las Grandes Fortunas:
Madrid challenged State's temporary solidarity tax on large fortunes, claiming it infringed Art. 156.1 and 157.3 and CCAA financial autonomy (because Madrid had 100% bonification of Wealth Tax). TC upheld tax: Said Wealth Tax is state-owned tax ceded to CCAA, State retains original power. Deduction of Wealth Tax liability ensures it does not affect capacity to collect revenues of CCAA. Capacity remains same.

5. On Sovereign Debt and EU Law

• DTC 1/2004 of 13 December 2004 - On EU Constitution:
  TC established doctrine of supremacy of Constitution but primacy of EU law in competence transferred. For financial matters, this means EU stability rules (Art. 135) have primacy over ordinary laws but not over Constitution.

3. Synthesis of Spanish Doctrine

Spanish scholars (Ferreiro, Martín Queralt, Calvo Ortega) summarize in three principles:

1. Unidad: One Spanish Treasury system, State has original power.
2. Autonomía Financiera limitada: CCAA autonomy is political but financially limited by coordinación, solidaridad y estabilidad.
3. Constitucionalización de la estabilidad: After 2011, budgetary stability is a limit superior to autonomy, enforceable even with Art. 155.

In practice: Spain is financially sovereign vis-à-vis EU only in pooled form, and internally sovereign State vs CCAA. CCAA never have sovereignty, only autonomy.