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Latino Daily News

Thursday January 30, 2014

Spain’s Black-Market Economy Worth a Quarter of GDP

Spain’s Black-Market Economy Worth a Quarter of GDP

Photo: Spanish economy

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Spain’s illicit economy is worth an estimated 24.6 percent of the nation’s gross domestic product, or roughly 235.14 billion euros ($320 billion), according to a study by the Finance Ministry.

The estimate is based on late-2012 data, the most recently available, according to the director of the study, university professor Jordi Sarda.

The report attributes the growth in Spain’s underground economy to the bursting of a long-building real-estate bubble, the “spectacular” rise in the unemployment rate - currently around 26 percent, virtually unchanged from the end of 2012 - and the “massive” use of 500-euro bills.

The study also pointed to a “serious moral problem as pertains to taxes” as a reason why Spain’s black-market economy - encompassing all types of illegal and unreported economic activity - far exceeds that of Germany, 13.1 percent of GDP; France, 10.8 percent; and Britain, 10.1 percent.

The underground economies of Italy, Portugal and Greece, however, are bigger than Spain’s.

In Spain, the growth in the underground economy has been particularly pronounced in regions hard hit by the collapse six years ago of a decade-long real-estate boom and by high unemployment, such as Andalusia, Castile-La Mancha and Extremadura.

The crisis also has widened the gap between those regions with the biggest underground-economy-to-GDP ratios and those with the smallest: from a difference of 7.3 percentage points in 2000 to 15.1 percentage points in 2012.

Finance Ministry technicians proposed actions such as increasing citizen awareness of tax fraud, boosting funding for Spain’s tax agency and enacting legal changes to avert tax evasion.

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