Catalan rebel town refuses to pay tax to Madrid

Gallifa becomes the first town in Catalonia to refuse to pay taxes to central government, instead paying them to a local tax agency.

GALLIFA, SPAIN  (REUTERS) - Hidden in the hills of Catalonia's Valles Occidental, the small village of Gallifa in northwestern Spain has taken a stance on Catalan separatism by rebelling against central government and refusing to pay taxes.

Gallifa is the first town to declare it will no longer pay taxes to Madrid, instead paying them to the Catalan tax agency (ATC).With secession aspirations running high and a snap regional election called for Sunday (November 25), Gallifa declared itself "fiscally un-submissive" on October 16 and its city council, governed by pro-independence party Solidaritat (SI), has paid its third quarter taxes to the ATC instead of paying them to the Spanish tax office (ATE).

"The effects are not going to be noticed, so far, because the Catalan governmentwill send what we transferred to them to Madrid," said Gallifa mayor Jordi Fornas.

"But if other local governments and other institutions do the same, as some entrepreneurs do, the Catalan coffers will be filled up and the moment we take the final step towards independence, we will have enough resources."

As Spain's economic crisis has deepened, pro-independence feelings have been rising in Catalonia.

Catalonia's busy Mediterranean ports, car factories, chemical plants and banks account for a fifth of Spain's economy. Until recently the region of 7.5 million people was content to push for greater self-governance - such as collecting and spending its own taxes - without seeking independence.

But Spain's recession, with 25 percent unemployment and drastic public spending cuts, has sharpened a Catalan perception that they are taxed unfairly.

Like the rest of Spain, Catalonia overspent during a decade-long property boom that crashed in 2007 and now it cannot borrow on the markets on its own because its debt has been downgraded to junk. That forced Regional PresidentArtur Mas, who as head of the regional government is elected by the assembly rather than directly by voters, to ask Madrid for a five billion euro bailout to meet debt payments.

Even so, Catalans blame their problems on Madrid rather than their own leader. Just as Germany has wearied of bailing out Greece and other southern European countries, many Catalans feel their taxes are being used by Madrid to prop up poorer areas of the country.

"Having a state of our own will obviously leave us out of the crisis. The crisis, and in Catalonia specifically, is thanks to us depending on Spain. So if we leave the Spanish state behind, we will also leave the crisis behind," Fornas said.

Many residents support the move.

"It might be a first step towards improving our situation. But we'll see, only time will tell," said Miquel Turon, while Joan Font says there will be strength in numbers.

"If people and entrepreneurs and other villages join us, we can reach a point in which pressure is high enough to make the Catalan government change and not send the money to the Spanish treasury anymore, keeping that money that in the end is ours," he said.

But others are more sceptical.

Enric Bosc says the Spanish government might find new ways to be involved.

"It might make them come after us with inspections and other things like that as the administration usually does. But I am happy we are the first ones," he said.

In part inspired by independence drives in Scotland and Belgium's Flanders, a growing number of Catalans believe their region - which has more people thanDenmark and an economy rivalling Portugal's in size - would be better off on its own.

Polls show that between 46 percent and 57 percent of Catalans want their own country, the highest levels ever.

For Elisenda Paluzie, Dean of Barcelona´s University School of Economics, if others follow the example of Gallifa, there would be pressure in the direction of secession.

"If they have the money in their hands because the citizens of Catalonia that are paying their taxes to the Catalan government then things have to change. They will have to establish a clear path towards independence and the building of their own treasury," she said.

Polls show Mas's CiU winning about 62 seats on Sunday. It's not enough for an absolute majority, but together with other parties such as the Republican Left (ERC), independence supporters will probably have a two-thirds majority in theCatalan parliament.