Main characteristic features of the Andorran economy and recent economic development

PUBLIC SECTOR

The Andorran public sector is made up of the General Administration, the seven local administrations –one for each of the seven parishes into which the Andorran territory is divided– and the Andorran Social Security System (CASS). The General Administration and the local administrations together manage more than 500 million euros in expenditure, a figure to which we can add CASS spending of 172 million.

According to data for 2006, the General Administration collected 66% of the income and administered 68% of public sector spending (without including the CASS) while the local corporations managed the other 34% and 32%, respectively. In 2006 the General Administration cleared public accounts with a non-financial cash deficit for the ninth consecutive year, amounting to 71 million euros. In the same financial period, the deficit of the local administrations together was approximately a quarter of the deficit of the Central Administration (17.1 million euros).

Indirect taxes are the main source of state income and they currently account for 87% of all non-financial income, having gained in importance over the past six years with the creation of new taxes. Rates and other income (7%) and income from patrimony (5%) are the other important sources of non financial income for the State, while the remaining entries for income (financial assets and liabilities) are of less importance. It should be remembered that there are no direct state taxes in Andorra. As far as the CASS is concerned, the total income from contributions amounted to almost 171 million euros in 2006, with half of this corresponding to sickness contributions, 45% to old age contributions and the remaining 5% to complementary contributions. In summary, it is estimated that the tax burden in Andorra is situated at approximately 20% of GDP.

As far as expenditure goers, the Central Administration spends slightly more than half of the resources (51%) on current expenditure (personnel, consumption of goods and services, transfers, etc.). The rest is destined to real investment (34%) and capital transfers (15%). In the case of the local administrations, the investment spending accounts for about one third of their budgets. Spending on personnel (26%) and consumption of goods and services (25%) absorb the other important part of the resources of the local administrations. In 2006, total liquidated public investments reached the figure of 175 million euros, 68% of which was executed by the Government with the remaining 32% being spent by the local administrations.

Andorra la Vella is the largest of the local administrations, and manages about 25% of the expenditure of all the local administrations. Encamp is the second in importance with approximately a fifth of the total resources used by the local administrations. It is followed by Escaldes-Engordany, Canillo and La Massana, while Sant Julià de Lòria and Ordino are the smallest administrations in terms of expenditure.