Concerns Grow About Black Economy In Spain

by Ulrika Lomas, Tax-News.com, Brussels

25 September 2009

The Spanish Inspectorate of Labor and Social Security launched an investigation into the black economy in early summer, and concluded that there has been a huge increase as a result of rising taxation and job losses in the official economy.

Reports suggest the inspectorate looks set to raise more than EUR300m in fines, well in excess of last year's record EUR292m. With back taxes and social security contributions included, the Spanish government has since 2005 collected EUR27bn from workers failing to declare income from the black economy.

The main sectors involved were the entertainment, hotel and catering trades, agriculture, and construction. The figures would tend to confirm World Bank estimates in 2007 that the black economy in Spain could be more than 25% of GDP – as much as an annual EUR250bn.

The number of illegal immigrants with undeclared income, and mostly from Latin America, Eastern Europe and Africa, has been expanding the black sector in recent years but the loss of tax revenue is of growing concern as Spain's budget deficit heads towards 10% of GDP.

Speaking at a press conference, the Minister of the Economy and Finance, Inmaculada García, admitted that Prime Minister José Luis Rodríguez Zapatero was concerned about the reports of the rise in the black economy and said that it was another negative consequence, alongside rising unemployment and tax increases, of the economic crisis.

Recommended