When I was younger I was living in Tenerife Island. This can sound very amusing for people that only know what tourism promoters sell. In fact, these things from commercials are true if you spend a week of your holidays there, but when you are working things are similar to live in any other city of Spain and you find more drawbacks than advantages if you proceed from a big city as Madrid or Barcelona. I was born in Madrid and I was living in Madrid all my previous life.
Of course, there are some things that are better in Tenerife than in Madrid, for instance, weather is nicer, people are friendlier and girls usually are more sympathetic but, on the other hand, in one month you can know most of interesting places and feel some kind of boredom. If you live in an island you are isolated, it is there where you find the importance of two things for running well the economy: aerial transportation and low taxes.
Many things must be brought from the continent and the competence is lower, when go to shopping you find that those products, especially perishable ones, are more expensive than in Madrid. The only way to make it more reasonable is reducing VAT. In fact, my salary should be much higher with the same VAT that in the continent in order that I could move from Madrid. Many businesses not linked to tourism could not run, and without many of these businesses could not run even tourism (the main industry of the Islands), especially, if we add the costs of travels from the continent to the island that are at a distance of a flight of more than two hours from Madrid.
This is an example that shows how taxes must fit the needs of the economy to make it competitive. But the only way to reduce taxes is that government is not oversized. I have nothing against public sector, in fact I was working there at a public research center and my salary proceed from taxes, but public workers should be the main interested people in a public sector that fitted well the whole society, because the reason for its existence is that the whole society runs better instead of worse. Any public job that does not provide value for the society should be eliminated at once, because private workers have the same and not less fundamental rights than public ones.
There are two main reasons in order that a region can have lower taxes than other ones when they need it: solidarity and strategy. In the case of the Canary Island both are valid and they justify it. Solidarity because our constitution grants some basic rights for any Spaniard, independently the place they live (and in these conditions of remoteness are more difficult and more expensive to grant), and strategy because there is a special interest of Spain to preserve the nationality of the islands from five centuries ago avoiding that can be controlled by any other country. Even today many European ships make a stopover there when they go to South America. This could not be justified permanently for the case of a region inside or near the continent.
This is a good illustration of how reducing taxes is a proper way to help people that need special support. I cannot understand how some politicians affirm always that the only way to help people is to increase them. The only thing that assures a tax increase is that more politicians will be needed to manage them, increasing the cost of the unproductive part of the economy, and making easier other problems that arise in an oversized and complex government as corruption.
Looking at the current situation of the Euro Area, public experts should analyze if their recipes are the correct to give support to people that need help. It seems that they are always proposing increases of taxes, but, perhaps they would be better asking for reduction of the costs of the states to make easier a reduction of taxes. But, finally for this economic problem only a political solution (or distribution of political power among different group of politicians) can be found and political power is always supported by public funds. Who is the German government in order to define the size (and internal power) of the French or Spanish government, for instance?