Monday, April 30, 2012

Some data about the black economy in Spain

Black economy, also called underground economy or shadow economy, is the usually untraceable, and hence untaxable, business dealings. It includes both legal business activities which evade taxes and illegal business activities which are underground. And precisely, as these business activities are not recorded, they cannot be quantified, so the Ministry of the Economy, the Ministry of the Treasury and the Tax Agency can have no official figures. However, many universities, banks, State agencies, economic or social studies institutes and even EU commissions release their estimates about tax evasion and tax avoidance.
In July 2008, just before the onset of Spanish property bubble and the current financial crises, the trade union GESTHA, made up of workers of the Treasury Department, drew a very revealing report about the back economy in Spain, with data from all the above-mentioned sources. And here you have two outstanding figures from this report:
First, in 2004, out of the 4,017 people with assets over 10 million euros, only 727 paid the corresponding taxes. Therefore, 82% (3,290 fortunes) did not declare their wealth. However, it does not mean that black economy applies to wealthy people only, because it is a universal fraud, including millionaires who have their money in tax havens, as well as nobodies who work in black or cook their books to evade or avoid taxes.
Secondly, black economy is estimated to stand for 20%-25% of the Spanish GDP. According to the Ministry of Labour in 2004, the black economy represents 20%, whereas in 2005 the Spanish Credit Institution (ICO) estimated that it represents 25%. And in between, in 2002, a study of the European Commission estimated that it stands for 22% (only topped by Greece, with 30%) and very far from the Netherlands (2%) or Austria (1.5%). According to this study, the Spanish black market stands for 241,465 million euros. To put figures in context: it is 2,500 times more than the cuts expected in education in the region of Extremadura.
Can you image what we could do if all this money was declared and taxed, representing 20-25% of the Spanish GDP?

About tax evasion:
GESTHA, the trade union of the Treasury Department:
GESTHA’s estimates about the Spanish black economy:
Cuts in education in Extremadura:



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