Underground economy robs Spain of critical tax revenues

The underground economy accounts for 18.6% of Spain's GDP. In other words, the Finance Ministry loses 200 billion euros per year to this part of the national economy. Based on these figures, we are average by EU standards but far from tightly-regulated countries like Germany, the United Kingdom and France. Underground economies in these countries represent a mere 13%-10%.

By lowering the incidence of fraud to Germany's level, the Ministry of Finance could collect another 20 billion euros per year in tax revenues. The underground economy results from excessive and inefficient labor laws, high taxes and widespread social acceptance.

The solution? Spain needs to enact reforms to lower taxation and simplify the rings and hoops that employers and workers need to jump through in order to do business. By making these changes, the Ministry of Finance would not have to raise taxes in order to raise the revenue it needs.