Black Economy Equates For 20% Of Spain's GDP

 

The 'Black' economy of Spain generated on estimated 205.2 billion euros last year - equivalent to a fifth of the country's gross domestic product - consultants A.T. Kearney claimed in a study commissioned by VISA Europe and released yesterday.

Spain and Portugal share third place in the ranking of Western European countries in terms of the ratio of underground economic activity compared with total GDP.

However, by value the Spanish black economy falls behind those of Germany, Italy and France.

Just some of the factors encouraging the country's black economy include relatively high taxes and social security contributions aswell as the large number of small businesses and self-employed, according to the authors of the report.

They also claim that the Spanish tax authorities lack the resources to aggresively pursue those who evade taxes by hiding income.

In terms of value, the main of Spain's black economic activity is in the form of transactions among companies with annual sales of less than 6 million euros, according to A.T. Kearney.

The expanding use of cash for large transactions is driven, in part, by a tenfold increase in the number of 500-euro bills circulating in Spain between 2002 and 2007, the study found.

Euro bills of that value now represent two-thirds of the cash in circulation in the country.

The study expressed concern that a widespread Spanish view of off-the-books economic activity "as something normal" leads to greater tolerance for corruption.

A move towards electronic payment systems would reduce the size of the black economy, the authors of the study concluded.