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Detail of the façade of the Diputación
The financial activity of the Comunidad Foral de Navarra is governed by a particular and specific system within the State’s organisation into autonomous communities, which has its roots in historical reasons. It is the so-called Convenio Económico, or Economic Treaty, between Navarre and the State.
The Convenio Económico governs the financial autonomy of Navarre within Spain and stems from the Ley Paccionada of 1841, whereby the Old Kingdom became part of the structure of the State, withholding its right to levy its own taxes.
Consistent with the Spanish Constitution, which protects and respects the historical rights of Navarre, the Ley Orgánica de Reintegración y Amejoramiento del Régimen Foral de Navarra specifically mentions the power befalling Navarre to uphold, determine and regulate its own system of taxation, provided that it does not conflict with international treaties and the State’s own system of taxation.
The Economic Treaty is, therefore, a consequence of Navarre’s financial autonomy. It lays down the criteria for fiscal harmonisation (the tax burden in Navarre may not be lower than that of the rest of Spain), and Navarre’s so-called “contribution to the State”, whereby the Comunidad Foral pays the State on an annual basis for the services and functions not transferred that the Central Administration provides in the Old Kingdom. The proportion of this common expenditure (Defence, Foreign Affairs, etc) that Navarre has to pay is calculated by means of the application of the so-called allocation index, set at 1.6%, a figure that reflects the relative income or share of the Comunidad Foral in the nation’s wealth.