The Black Economy In Spain

Bulls
Bulls

A report has just been leaked to the Cadena SER radio station that the black economy in Spain now makes up 23.3% of all transactions. This means that a quarter of the economy in Spain doesn’t show up on the official figures for the size of the GDP for example. The figure is 5% higher than a decade ago and it is getting higher due to the famous “Crisis”.

Up until now it has been normal for the plumber to say “Do you want a receipt?” the subtitle being, “do you want to pay 16% extra on top of your bill”. Apparently there has been a sea change in the way the situation is approached in the last year and it is now the buyer who asks whether it is possible to do the job without VAT rather than the vendor wanting to avoid a bit of tax and paperwork. Funnily enough Spain still only ranks second in the tax avoidance stakes as the figure in Greece is much higher.

As someone either living in Spain already or looking to come to Spain to live how does this affect you? Well you can turn a blind eye to it I suppose. The majority of businesses in Spain do this to a certain extent it is not just 23.3% of businesses do it on 100% of their income and the rest are squeaky clean. If you are thinking of putting together a business then you need to look at the disadvantages of joining the Black Economy in Spain.

1) Loans are harder to come by if you cannot prove your real income.
2) It is difficult to sell a business at its real value if the full turnover and profit are not revealed. Usually Spanish businesses run two sets of books to counteract this issue and the second set is only brought out when trying to sell the business!!
3) You can go to prison if Hacienda, the tax office, find out.
4) Am I missing any other reasons?

What do you think? Do you know of any company in Spain who has not done this to a certain extent. It is prevalent in teaching, hostelry, odd jobs, real estate… just about anywhere really. The real surprise may well be that it is only 23.3%!!

Related Reading:

1) La Economia Sumergida (The original report)
2) So What Is Entrepreneur Solo? (My blog where this article will appear in another form)
3) Being an Expat Entrepreneur In Spain (Guest Post in Entrepreneur Solo)

3 thoughts on “The Black Economy In Spain

  1. It is rife, even here where our equivalent of IVA (IGIC) is only 5%. We took a decision when we arrived here ten years ago, that we wouldn’t do any black transactions. The reaction from accountants, bank managers, pretty much everybody was that we were mad!

    But we’ve stuck to it. I don’t mind paying a reasonable amount of tax, and overall it’s way, way less than we were paying in UK.

    1. Ditto. I always get a shock when I get lumbered with a bill at the end of each three month period but I believe that the system only works if you pay into it. When my wife was giving birth in an excellent hospital or my daughter hospitalised for ten days with pneumonia I realised that this is where our taxes go. Without them the country is in limbo. I have to say though, it looks as if the country is in limbo with these figures 🙂

  2. I think there is a general feeling among the Spanish that the money will be misused/stolen by politicians therefore the idea is to avoid paying as much to them as possible. And when you look at the amount of useless roadworks that go on and politicians found with their hand in the tin it’s understandable. The idea that our taxes are not being used wisely and so we should avoid paying them is something that’s beginning to happen in the UK now too.
    Also your taxes don’t go into the health service the Social Security payments do so dodging taxes isn’t taking away from those contributions.

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