Ministry of Finance (Spain)

Overview

The Ministry of Finance or Ministry of Treasury (Spanish: Ministerio de Hacienda, MH) is the department of the Government of Spain responsible for the design and implementation of the government policy on public finance and budget. It applies and manages the regional and local financing systems and the provision of information on the economic-financial activity of the different Public Administrations. The Finance Ministry also manages the cadastre and collects all the State taxes through the Spanish Tax Agency as well as controlling most of the state-owned enterprises through the State Company of Industrial Participations (SEPI). Likewise, the MH manages the central government goods, the European funds and the public lottery. However, most of its duties are carried out by autonomous agencies like the Tax Agency and the Royal Mint. Established in 1714, it succeeded the Secretariat of State and of the Office of War and Treasury in all financial affairs. At this time, it was named Veeduría General and it was headed by a Universal Inspector, who in turn was subordinate to an Inspector-General. It was formally established as a ministerial department in 1720, when it was renamed as Secretariat of State and of the Office of Finance. Since March 2026, the finance minister has been Arcadi España, who previously served as secretary of state for territorial policy and as regional minister of finance of the Valencian Community.

Origins

Before the arrival of the Bourbon dynasty to the Spanish throne in the early 18th century and the progressive centralization of the public treasury, numerous bodies coexisted in the Spanish crown that had powers over the royal treasury.

Castile

In the Crown of Castile, from the 15th century onwards, finances were managed by the Contaduría Mayor de Hacienda (roughly translated as the General Accounting Office of the Treasury), composed of chief and junior accountants. When the Cortes met at Madrigal de las Altas Torres in 1476, they established two Contadurias Mayores and, during the reign of the Catholic Monarchs, there were four chief accountants, two for each Contaduría. However, the deficiencies of the Castilian tax system, as well as conflicts with the large cities with voting rights in the Cortes, led King Charles I to create the Council of Finance between 1523 and 1525, as a supreme body responsible for correcting these problems and settling financial disputes. This Council, highly inefficient in its early years, would eventually assume control of economic and financial policy from 1593 onwards, when new internal rules gave it its own jurisdiction and integrated the chief accountants into its ranks. However, until the arrival of the Bourbons, the Crown's taxing power would remain limited to the will of the Cortes, which continued to play an important role in the approval of new taxes. Finally, from 1687 onwards, in addition to the Contaduría Mayor and the Council of Finance, there was also the position of Superintendent-General for Finance, a sort of finance minister who oversaw the royal treasury.

Aragon, Navarre and the Basque provinces

In the Crown of Aragon and its kingdoms, in addition to different taxes, each kingdom had their own fiscal institutions, such as the General Deputations, the bailes, and the maestres racionales. Furthermore, it is worth noting that the Aragonese kingdoms rarely had common institutions, and it wasn't until the reign of the Catholic Monarchs that any appeared. As for the Kingdom of Navarre and the three Basque provinces (Álava, Gipuzkoa, and Biscay), all of them had their own institutions (such as the Deputation of the Kingdom of Navarre or the General Assemblies) which, unlike those in Aragon, were preserved beyond the 18th century due to their loyalty to the new monarch during the War of the Spanish Succession. It is also important to understand that these territories were incorporated into the Crown of Castile and did not form a separate entity, although they retained their own institutions and privileges due to their special characteristics and relationship with the Crown. This meant that if the king needed resources from these territories in the north of the Iberian Peninsula, he had to request them from each of their respective Cortes (parliaments), in a procedure similar to that used before the Cortes of Castile.

Eighteenth century

Following the war of succession that consolidated Philip V on the Spanish throne, he approved a series of decrees, called Nueva Planta decrees, which, as punishment, suppressed the institutions of the kingdoms of the Crown of Aragon and their powers were assumed by the Castilian institutions, namely: Council of Finance, Contaduría Mayor de Hacienda and Superintendent-General for Finance. The sovereign's first measures were to establish in Spain a system similar to the French one, with a cabinet of ministers and administrative departments for each branch of government. In 1705 he divided the unique Secretariat of Universal Office in two, one secretariat in charge of War and Finance matters and another "for everything else". This division lasted until the final moments of the war, when the monarch further specialized the government and created the five original ministries of Spain: State, Justice, War, Navy and the Indies, and Finance. The Finance Department was not initially referred as a "Secretariat of State and of the Office" like the other four, but the Veeduría General (roughly in English: Inspectorate-General) and headed by the Universal Inspector of the Inspectorate-General (Spanish: Intendente Universal de la Veeduría General), the primitive denomination of the current position of Minister of Finance. Jean Orry served as inspector-general from 1714 to 1715.

Following Orry's dismissal, the king abolished the Veeduria General and transferred its responsibilities to the Justice Secretariat until 1720, when financial affairs were again separated and given their own State Secretariat. Juan de Dios y Río González, 1st Marquess of Campoflorido and former Governor of the Finance Council, served as Secretary of State and of the Office of Finance. During the reign of Ferdinand VI, a long process of recovery of the direct administration of the main revenues and taxes began, reconstituting the assets of the public treasury. Also, at the end of his reign, between 1754 and 1755, the king implemented a series of administrative reforms that sought to clarify the regulations of the administration and that established what the specific functions of each ministry were. With the royal decree of 1754, a truly bureaucratic administration for the treasury was created. The State Secretariat, as the governing body, coexisted with the agencies inherited from the Habsburg monarchy. Of all of them, the one that stood out as second in importance was the General Superintendency of the Royal Treasury, the body to which the Directorate for General Revenues depended—the body that administered the Crown's most productive revenues: customs duties and those derived from the royal monopolies of tobacco, salt and lead, among others. All these departments maintained a certain independence from each other, to the point that the directorates-general functioned as today autonomous bodies do. and an organic subordination barely existed. To avoid conflicts of competence that could arise between the Secretary of State of Finance and the Superintendency of the Treasury, they were resolved by making the holder of both were the same person: the Secretary of State. However, they were strong organs and a good proof of this was the construction in the main cities of the Kingdom of palaces destined to house their employees. This is the reason for the current existence of customs buildings in Valencia—today High Court of Justice of the Valencian Community—, Barcelona, Málaga (today Museum of Malaga) and in Madrid—current headquarters of the Ministry—. All of them were architectural projects of great importance undertaken during the reigns of Ferdinand VI, Charles III and Charles IV.

A single tax

Since 1754, the Directorate for General Revenues was defined as the body in charge of controlling the main taxes and existing revenues: fundamentally, these were tariffs and provincial taxes. From within this Directorate, promoted by The Marquess of the Ensenada, Secretary of State for the Treasury, took place the creation of a general cadastre for Castile aimed at reducing the many indirect taxes and few direct contributions to a single tax (Spanish: Única Contribución), which had previously been created in the territories of the old Crown of Aragon during the reign of Philip V. Although the project failed, a whole program to be followed by the subsequent owners of the portfolio was established.

Finances of the Indies

Three decades later, in 1787, new changes arrived. On the one hand, The Count of Floridablanca attempted to centralize the government apparatus by creating the Supreme State Board (Spanish: Junta Suprema de Estado, similar to a council of ministers), which would later lead to his downfall after this body generated numerous detractors, such as the Count of Aranda, a staunch defender of the Polysynodial System. During this period, the practice arose of submitting the reports and draft decrees of the Secretary of the Treasury, first to the Junta and, after its dissolution, to the Council of State. At the same time, the ministries were reformed again, dividing the Secretariat of the Indies in two and creating by Royal Decree of 8 July 1787 a Secretariat of State and of the Office of Grace and Justice of the Indies and a Secretariat of State and of the Office of War, Finance, Trade and Navigation of the Indies. Despite the intention, this reform failed to solve the problems it sought to address. This, coupled with the economic crisis that developed during the reign of Charles IV, exacerbated by the political instability in Europe following the French Revolution, led to the approval of Royal Decree of 25 April 1790, reinstating the traditional division into five Secretariats of State and the Dispatch (State, War, Navy, Finance, and Grace and Justice), each of which was assigned the matters pertaining to the Indies. Imperial tax matters were reincorporated into the peninsular Secretariat and from that moment until 1836, except for specific periods, there were two tax areas within the same Department: Spain and the Indies.

Nineteenth century

In 1793 began a continuous period of wars that did not end until 1845 and the main resource that sustained them was the public debt that did not stop growing and that had, among other consequences, the creation of the Bank of Spain, the implementation of everal confiscation policies and the creation of a budgetary system to control the deficit. In 1795 the Superintendency of the Treasury was suppressed assuming its responsibilities the ministry. Between the Peninsular War (1808-1814), it existed two treasury ministries, one belonging to the Napoleonic government of Joseph Bonaparte and other to the Spanish one. For a better organization, in 1824, during the reign of Ferdinand VII, it was created the Directorate-General for the Treasury—that still exists today—as a redistributive body of public funds and in 1834 the current Undersecretariat of Finance was created with multiple bodies depending on it. This last reform was important because it was the moment when the Councils were suppressed and the Courts of Justice was created. In 1836, the administration continued growing and the Directorate-General for Confiscated Properties was created—direct predecessor of the current Directorate-General for State Assets—and the Treasury Offices for the Indies are suppressed.

Tax reform

The unstoppable constitutionalist process that took place during the reign of Isabella II imperatively needed a sound public finances as a basic instrument to create wealth and provide political stability to the rising bourgeoisie. With the rise to power of the moderate party took place the tax reform of 1845, due to the decided personal push of the Secretary of State and the Dispatch of the Treasury, Alejandro Mon. This tax reform meant the end of the complex tax system of the Ancien Régime through a strong simplification that for the first time gave importance to direct taxes and reduced indirect taxes, a reform that today is considered the beginning of the modern Treasury. It was also at this time that the Ministry acquired the current name. The minister Mon reform implied a new organic structure, to adapt its machinery to the new circumstances. It also involved the transfer of the Department to its current headquarters: the building of the Real Casa de la Aduana. This responded to the need to centralize and group in the same place both the Secretariat and the Directorates-General for Taxes and the Treasury, which, as noted above, enjoyed a high degree of autonomy from the Ministry. If Mon was the creator of a contemporary treasury from the point of view of the technique and tax law, Bravo Murillo, head of the Treasury in 1849 and in 1850, designed the Treasury as a fundamental pillar of the General State Administration. In fact, under the term of Bravo Murillo, the Accounting Act of 1850 was passed. He consecrated the term «Ministry» to replace the classic one of «Secretary of State and of the Dispatch» and he organized the Department under a modern bureaucratic pattern. With him, the authority of the Minister on the directors general was reinforced and the directorates-general for Direct and Indirect Taxes, for Accounting—predecessor of the current Office of the Comptroller General of the State Administration—, for the Debt and also for the Contentious—predecessor of the current Solicitor General—were consecrated like classic organs of the Public Treasury, Besides that, Bravo Murillo also promoted the creation of the General Deposit Fund, an instrument initially designed to rid the State of the dependence on banks when it comes to obtaining new loans. But in the end it did not have the expected effects. The development of the country and the need to remove it definitively from the financial crises that took place during the 19th century led to new economic and tributary reforms carried out by the ministers Laureano Figuerola (1869), Navarro Reverter (1895) and Raimundo Fernández Villaverde (1902-1903). This, together with the culmination of the codifying process in Spain, influenced new organic reforms of the Public Treasury and the beginning of the consolidation of a new bureaucratic structure. Between 1873 and 1878 the Office of the Comptroller General (the internal supervisory agency of the state public sector) was institutionalized. In 1881 the State Solicitors Corps was created coinciding with the consecration of the economic-administrative procedure. The same year, it was created the Inspectorate-General of the Treasury as an instrument to improve provincial economic management. The immediate effect was the creation of the Treasury Delegations in the provinces.

Twentieth century

Between 1902 and 1903 a suitable administrative structure was adopted for the tax reform planned by Fernández Villaverde. In addition, each directorate-general was regulated by a specific regulation of its own. In 1906, with the approval of the Parcel Property Cadastre Act, promoted by Minister Moret and assisted by José Echegaray as Chairman of the Committee in charge of drafting the draft bill, progress will be made in consolidating a system of direct taxes. In 1911, the Treasury Administration and Accounting Act was approved, the backbone of the entire system of budgetary control and public expenditure. This administrative structure remained practically unchanged until 1957. During this period, the abolition of the Ministry of Treasury between 1923 and 1925 deserves special mention, due to the structure implemented by the Military Directorate presided over by Primo de Rivera. During the Second Spanish Republic, different organic reforms were also undertaken, among which the creation of the Central Economic-Administrative Court stands out. However, all this period is opaqued by the tragedy of the Spanish Civil War from 1936 to 1939. The Civil War provokes the creation on each side of the conflicts its own treasury departments: in the republican side, the Ministry of Finance and Economy and in the rebellious side the Finance Commission, later transformed in 1938 in the Ministry of Finance. After the war, the Francoist regime established an autarky system that was suppressed in the late 1950s. In 1957 a new tax reform was carried out and opened the way to raise the national income and remove the country definitively from the economic situation that followed the Civil War. This reform needed a modern, simplified and efficient Treasury. In 1959 an Undersecretariat for the Treasury and Public Expenses was created in charge of the control of the financial resources of the State and of the preparation of the Budgets. It was the moment in which the mechanization of processes in administration is introduced, the embryo of tax informatics. Study and tax information services were strengthened during this period. As a result of the 1959 Stabilization Plan promoted by Minister Mariano Navarro Rubio, between 1963 and 1964 the process of tax reform culminated with the approval of the General Tax Act and Tax System Reform Act. New taxes were systematized (on income and on business traffic). This implied above all a reform of the technical bodies of the Treasury in order to specialize them even more in the new tax system. The economic austerity plan of 1967 led to new reforms, simplifying the structure of the Ministry when the Undersecretary for Treasury and Public Expenditure was abolished.

1978 Constitution

The late 1970s Taxation Reform Plans, the approval of the General Budgetary Act and the approval of the Urgent Measures for Fiscal Reform Act, both in 1977, prepared the ground for the Constitution of 1978. In the years following the approval of the Constitution, the Ministry of Finance began to take shape as we know it today. Through Royal Decree-Law 22/1982, of December 7, on Urgent Measures for Administrative Reforms, the Departments of Economy and Finance were merged, creating the Secretariat of State for Finance as the central body of the public treasury. In 1987, the Directorate General for Personnel Costs was founded.

In 1992, the Spanish Tax Agency was created, an autonomous body within the Ministry of Finance responsible for the effective implementation of the tax and customs system and for managing the State tax and customs system, as well as the resources of other national and European Union public administrations and entities. Four years later, in 1996, the budgetary responsibilities were equated with the financial ones, creating the Secretariat of State for Budget and Expenditure.

Present

On 1 January 1999, the Eurozone was created with the establishment of the single European currency, the euro (€), and the process concluded on 31 December 2001, when the peseta (₧) ceased to be legal tender in Spain after more than 130 years. Since then, monetary policy has been governed by the Eurosystem, headed by the European Central Bank (ECB) and the governors of the national central banks of the Eurozone. After a brief period between 2000 and 2004, the Ministry of Finance was merged again with the Ministry of Economy, once more forming the Ministry of Economy and Finance. As a result of this merger, when the departments were divided in 2011, responsibility for the Public Treasury was transferred to the Ministry of Economy, where it remains today.