If you walk out on the street any day of the week and look around, the first thing you see are people; people who wear clothes, eat food, live in different types of home, receive an education and pay their taxes... You'll also see companies, shops, offices, transport services, etc. that allow us to have clothes, food and many other things. And finally, you'll find the "Public Sector" services offered by health centres, schools, sports complexes, the town hall, etc. which meet our basic needs and make our lives better.
People, companies and the public sector are the protagonists of the economy and life.
The public sector has an important role to play in economic activity; among other functions, it is responsible for setting the "game rules" for business and at the same time, for promoting the distribution of wealth through taxes, distribution of spending, laws, public bodies, etc.
The public sector consists of government, autonomous bodies and publicly-owned companies, and its aim is: to achieve the highest level of quality of life possible for the whole of society, by taking the necessary decisions.
This is what the public institutions do, here in the Autonomous Community of the Basque Country (municipal authorities, provincial governments and the Basque government), and also in Spain and the European Union.
Most of the public services we receive in Gipuzkoa are provided by the government of the autonomous community. However, there are other services, which lie outside the powers allocated to the autonomous community, or which have yet to be transferred and which are provided by the Spanish state (e.g. defence, customs control, etc.), or the European Union (e.g. monetary policy). Spending on public services that have not been transferred are financed by the Basque Autonomous Community, through the payment of an amount of money known as the ‘Quota' [Cupo].
Legal framework of the Autonomous Community of the Basque Country
The financial and tax-paying relationship between the Autonomous Community of the Basque Country and the Spanish state is governed by the Economic Accord [Concierto Económico]. This is based, on the one hand, on Additional Provision 1 of the Spanish Constitution; which states that the Constitution offers protection and respect to the historical rights of the 'foral' territories. At the same time, Organic Law 3/1979, which establishes the Statute of Autonomy of the autonomous community of the Basque Country, recognises that the institutions of the Historical Territories have the capacity to establish, maintain and regulate their own tax system.
For this reason, the provincial (territorial) governments have full capacity to manage, regulate, inspect and collect the taxes of their specific territory. Nonetheless, they must respect the coordination, harmonisation and other shared regulations in the area of taxes.
For this reason, all taxes, except those managed by municipal authorities, are collected by the provincial governments.
Basic activities of the public sector:
- To establish taxes. The Public Revenue Department (revenue office) [Hacienda Pública], is in charge of establishing the taxes that everyone living and working here has to pay. The corresponding administration obtains the finance its needs for its expenses –or most of them, at least– through the establishment and collection of taxes.
- Establishing regulations.It establishes the rules that all persons and economic organisations have to follow and respect in their activities. The government establishes rules in many areas; for example, in relation to employment contracts, the rights and obligations of the work force and businesses, rules on pollution, competition between companies, etc...
- Stabilising the economic situation. The economy goes through different cycles, and there are periods of economic boom and others of economic crisis; ordinary individuals suffer from these economic imbalances. Governments have to protect people and help them put up with the consequences of these changes: unemployment, inflation, etc...
- Redistributing income.The government can influence the distribution of income and wealth through the income it raises and the public spending it carries out. It does this by collecting more taxes from those who have most, thus reducing the gap in income, while at the same time allowing the money to be used to finance services for those who have least.
- Offering public services.The public institutions are in charge of offering all citizens the goods and services that private companies do not offer because they are not considered profitable. These goods and services are called public services, and one of the main features of such services is that: many people can use that public service at the same time. Examples of public goods and services include: roads, schools, hospitals, sports complexes, social integration services...