What are the real cost for companies leaving Catalonia?

Question

The last weeks there was problems and lots of discussions between the Catalan and Spanish governments. There was a referendum that the Catalan government accepts but the Spanish one doesn't and the result was a 'Yes' for independence. I do not want to discuss this, there are a lot of opinions about it.

Now it is still not clear if the Catalan government declared independence based on this referendum result, but before anything is clear many companies had already left Catalonia under this uncertainty.

Before any declaration, lots of companies decided to move their social HQ to another region of Spain, to avoid loses under this uncertainties and avoid problems in a hypothetical declaration of independence (Also to be under the European umbrella of security). I understand why the companies move their social HQ and not the work force and most of the offices (They keep this as always). I do not understand the effects in the economy in Catalonia.

If companies move they will pay autonomic taxes to another region of Spain, but some people argue they are not important losses for the Catalan economy

(see http://www.naciodigital.cat/noticia/140007/efecte/limitat/trasllat/caixabank/banc/sabadell http://www.publico.es/economia/fuga-sedes-empresas-catalunya-cuestion-imagen-impacto-fiscal.html I only found things in Spanish or Catalan).

Another important taxes are paid to the Spanish government so it will not change in different regions. They also argue that the workforce is still in Catalonia and therefore it is not a big impact. But even if all of this is true, many people say it is a big deal for Catalonia.

A trickle of companies fleeing the restive Spanish region of Catalonia threatened to turn into a flood as a second major bank and two more firms said they would move their head offices to other parts of the country.

http://money.cnn.com/2017/10/06/investing/catalonia-independence-banks-companies-spain/index.html

So, what effects does this social HQ movement have for the Catalan economy? Is it only an image effect that can affect in the future, is it something more important, is it really not a big deal, is it exaggerated to make the independence movement look worse or not exaggerated to make the movement not so bad?

I want an answer about the actual situation and the future without an hypothetical independence of Catalonia. (Let's suppose the independence does never happen.)

As a plus: What effects have this if Catalonia is independence? (If it's too broad I can ask another question.)

Answer 1

Companies are moving their HQs out of Catalonia for "trying to guard the interests of their customers"

Mainly, they leave Catalonia fleeing from the uncertainty that the political situation is having now in Catalonia. Uncertainty is one of the worse enemies of any economic forecast and this is one reason that they are quitting Catalonia

Other important aspect is the Juridic Safety. This is very important as no political system should be based in legislation that has effects prior this law or code. This what is called laws with retroactive effects. This kind of laws break the Juridic Safety principle. The current government of the Catalonian Autonomous Comunity has been anouncing project of laws with retroactive effects like the cancelation of the Catalonian Debt, Census projects, etc. This lack of Juridic Safety is very dangerous for companies and persons alike.

Another issue is the fiscal obligations. Today the Society Taxes are being payed to the Spanish Tax Dept so there is no difference there. There is another tax that is called IAE (Tax of Economic Income) that is payed to the municipality that the firm works in. This should not be very different, unless the situation persists and companies start to move offices, workers, etc. out of Catalonia.

So, to make things shorter. In the close future, no big difference is going to happen when a company moves his HQ out of Catalonia. If the uncertainty in Catalonia persists and companies start moving their productive means out of Catalonia, then the impact will start to be bigger.

Answer 2

I'm not sure how you'd go about finding exact costs of these companies moving away, but I believe it's probably safe to assume that the following are probable costs:

For the company-

The cost of buying new property for their headquarters might exceed the value of selling their old(if they own it obviously)

Bad will generated from potentially harming the region by moving

For the region-

Decreased tax base, not just from the company itself, but from highly skilled employees that are liable to follow the headquarters.

Loss of jobs, both from labor that isn't able to follow the company, and from local service companies that no longer have a larger entity to gain business from.

Domino effect of a large company leaving/failing, causing smaller companies that relied on them to fail. For an example, need only look at Detroit in the US.

Potential 'cost' for the independence movement-

If enough companies left the region, it might call into question Catalonia's ability to actually sustain itself after leaving. That might shift the support/opposed equation toward staying, given one of the pillars of the movement as I understand it, is that Catalonia pays more into Spain than it gets back. Would be hard to justify leaving if you no longer have the economic base you need to survive on your own.

Answer 3

You have to dig a bit deeper to appreciate the motives and the costs for leaving Catalonia.

The real economic prize for an independent Catalonia is the ability to tax all Spanish exports and imports that move physically through the region of Catalonia - Germany has already provided the legal groundwork for this with the MAUT and there is nothing Spain can do if Catalonia gained independence. This is modern highway robbery.

Neither the European Union nor other Spanish regions would appreciate the Catalans extorting their businesses with lawful - under EU law - export and import taxes - the Catalan region already has a fat tourist tax and has shown what it is after.

If not for other reasons this huge vacuum cleaning of Spanish fruit and vegetable exports etc will ensure that an independent Catalonia would be booted from the European Union - again if for no other reason EU will fall apart when the German MAUT system is being rolled out and increased in size to cover all intra-EU movements of goods and persons - there will be no free movement anymore.

This will happen - Denmark is asking to copy the German system and apart from the ferry links Denmark will toll on the goods that go via the Oresund bridge and a new tunnel is - finally - being proposed to be built at Elsinore-Helsingborg - a route some 50 km shorter.

The companies that are moving their official registered address are simply ensuring that they stay inside the EU and that their business licenses stay valid, to do business in Spain and in the EU.

The reason the Flemish are backing Puigdemont is that they want to leave Belgium and form a separate state but if they do they would also lose their membership of the EU and if they can help the Catalans pave the way, they can get the same deal. For now the Flemish are fearful of losing the fat incomes from EU institutions and membership.

Read more in my coming book on Catalonia on Amazon Kindle. Eric Thomsen.