The protection of financially weaker local authorities calls for the institution of financial equalisation procedures or equivalent measures which are designed to correct the effects of the unequal distribution of potential sources of finance and of the financial burden they must support. Such procedures or measures shall not diminish the discretion local authorities may exercise within their own sphere of responsibility.
Article 9 of the Charter is aimed at ensuring that local authorities are entitled to sufficient financial resources. The legal authority to perform certain functions is meaningless if local authorities are deprived of the financial resources to carry them out. Andorra has not ratified Article 9, paragraph 2; Article 9, paragraph 5 and Article 9, paragraph 8 of the Charter.
In Andorra, the financial resources of the municipalities are based on their own taxes, taxes shared with the government, and on transfer of funds from the General Budget. The principles on financial resources are established directly by the Constitution (Articles 80.2 and 81) and developed throughout several Qualified Laws and ordinary laws.
At the moment of the visit of the Congress delegation, a tripartite negotiation process on a reform, lasting three years and involving the parliament, the government and the municipalities, was about to be finalised. The purpose of the reform is to update the entire system of transfers, through adapting it to the competences of municipalities and the new framework of State taxation, in place since the introduction of a full system of direct taxes, such as the income tax and the tax on corporation. In addition, the criteria of distribution between municipalities are planned to be revised, taking into account new parameters and based on the principle of solidarity introduced in favour of the municipalities that have fewer revenues from local taxes. The less economically advantaged Parishes would be compensated, as they are less able to generate their own resources. To this purpose, some asymmetries, that have an impact on the budget, have been identified, linking the expenditures for competences to the transfer of funds from the State.
As for the non-ratified provisions of the Charter, the rapporteurs are convinced that the on-going reform on transfers and competences, properly consulted with local authorities, will be implemented with due respect for the relevant principles of the Charter and that no obstacles will exist to the ratification of paragraphs 2 and 5 of Article 9 after the enactment of the reform.
Article 9.5 sets the principles of solidarity, referring to financial equalisation procedures to protect the financially weaker local authorities. Rapporteurs were told by all the interlocutors, both at national and municipal level, that the introduction of the financial solidarity principle is one of the main points of the reform under discussion. Once the reform is approved, no obstacle will remain to the ratification of this paragraph of the Charter.
The rapporteurs consider that the requirements of Article 9 of the Charter are respected in Andorra. As for the non-ratified provisions, they consider that very little is required to enable ratification of paragraphs 2 and 5 of Article 9. Consequently, the rapporteurs encourage Andorran authorities, once the reform in process is finally approved, to ratify these provisions.