Spain managed to increase VAT collection by 6.3 billion per year during 2022 and 2023 thanks to a reduction in tax fraud and the underground economy. It is the main conclusion of a report prepared by EsadeEcoPol, which points out that the key to surfacing these black payments was the increase in payments through electronic means.
The document signed by Francisco de la Torre, Treasury inspector and director of the think tank’s tax forum, confirms that, since confinement, consumers have been increasing their consumption and, in addition, resorting more frequently to paying by card to the detriment of cash. During last year, card operations on final consumption were almost one in three, close to 60,000 million, according to data from the INE and the Bank of Spain.
Credit cards leave a trace, which is why in recent years there has been an increase in the percentage of operations subject to and declared by VAT, which has even been higher than consumption in that period, the report explains. “Everything leads us to conclude that there has been a reduction in the underground economy, accompanied, with great probability, by better tax compliance,” he adds.
The Treasury inspector explains that Spain went through the so-called “Hugo effect” in 2020, in relation to a sharp drop in revenue as a result of the collapse of the economy. But during 2022 and 2023, just the opposite happened: “An unexpected increase in income” that, although it could peak, “has been consolidated.”
For De la Torre, “the increase in revenue linked to the reduction of the underground economy is excellent news,” because it could allow a greater volume of public spending for social needs or a reduction in the deficit. But the author demands to go further: “We should insist on the information obligations of payment methods, intensifying them and extending them to other payment methods that leave a trace, such as transfers, including those of smaller amounts.” The tax expert points out that this reduction in the underground economy could also be due to improved social awareness. “Convincing the Spanish that paying their taxes was, is and I believe will continue to be the most important anti-fraud measure,” he concludes.
