Spanish underground economy is higher than European average

Underground economy in Spain set to rise/Shutterstock Images

22 February 2023, Madrid: The underground economy, or black money, that circulates in Spain is in the spotlight again. Spanish informal activity has increased the most in Europe after the pandemic and is expected to continue to rise due to inflation and the energy crisis.

According to El Debate, a European Parliament report, “Taxation of the Informal Economy in the EU” says that the pandemic saw an increase in black money in Spain which rose 9.74 per cent from 2019 to 2021 compared to 8 per cent in Italy and 5.7 per cent in Greece.

Millions of euros could circulate in black money in Spain. Antonio Garamendi, President of the Spanish Confederation of Business Organisations since 2018 has called for measures to control it.

Some economists point out that social peace and necessary money flow is supported by the underground economy. Last year the Ministry for the Treasury and Public Function said the national Spanish average of the ratio of underground economy in relation to GDP was 23.1 per cent. By comparison, Afghanistan has the highest informal economy size at 72 per cent and the UK stands at 10.3 per cent according to World Economics.

The high costs of the tax system, the excessive regulation of economic activity and the meagre prosecution of tax fraud were cited as reasons for the proliferation of the underground economy.

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