Spanish black market soars

Spain’s informal economy, also known as black money, has been rising steadily since the beginning of the pandemic, with an increase of 9.74% from 2019 to 2021, according to a recent report by the European Parliament. This percentage rise is higher than in Italy and Greece, where informal activity increased by 8% and 5.7% respectively.

The report highlights the possibility of millions of euros circulating in the Spanish black economy. The rise is expected to continue due to inflation and the energy crisis, which could lead to further increases in the cost of living.

Although some economists argue that the underground economy supports social peace and necessary cash flow, Antonio Garamendi, President of the Spanish Confederation of Business Organisations, has called for measures to control it. The Ministry for the Treasury and Public Function previously reported that the national Spanish average of the ratio of underground economy to GDP was 23.1%, the third highest in Europe. Afghanistan has the highest informal economy size at 72%, while the UK’s is at 10.3%, according to World Economics.

The high cost of the tax system, excessive regulation of economic activity, and the inadequate prosecution of tax fraud were cited as reasons for the proliferation of the underground economy. Some experts say that reducing the regulatory burden and simplifying the tax system could help reduce the informal economy.

The Spanish government’s focus on creating jobs and attracting foreign investment is seen as a key strategy to help combat the underground economy. According to the report, measures aimed at reducing the informal economy in Spain could lead to higher tax revenues and more public funds for social services.