A recent report by La Fundación de las Cajas de Ahorros (Funcas), has found that Spain’s black economy is lowering the amount of tax collected by as much as 23%. They believe that this amounts to shortfall of around €70 million due to the black economy. They argue that this amount would be enough to fund the entire public health system across Spain.
The black economy is rife across Spain with many cash payments that are subsequently not declared as revenue due to the lack of receipts. The black economy is apparent in a range of industries, even in monthly salaries where a part of an employee’s monthly wage is paid ‘under the table’.
Funcas estimate that the tax evasion across the country amounts to some 6% of Spain’s GDP. As a result, it makes it much harder to manage the government’s budget compared to other countries where the black economy isn’t so common and apparent.
Furthermore, the report by Funcas also shows the stark regional difference with undeclared revenue. The north of Spain appears to match northern Europe with the attitude towards tax payment, with a higher declaration of income. Tax evasion seems to be least common in the regions of Navarra and the Basque Country as well as in Madrid. However, tax evasion is more apparent in the Canaries as well as Castilla-La Mancha, Extremadura and Andalucía.
As with the nature of the black economy, it is difficult to gather accurate data. However, many tax analysts agree that tax evasion in Spain is particularly higher than the rest of the EU and other OECD countries. Yet, improvements have been made, with tax fraud being more apparent during the 1980s and 1990s than it is now.
The government has stressed that tax evasion reduces the amount of investment in public services such as health and education. They also claim that they will intensify efforts to combat the practice. However, in 2017, fighting tax fraud resulted in a collection of a figure substantially less than what was collected in 2016, showing there are still many improvements to be made in their efforts to combat the black economy.
January 14, 2021