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The Spanish economy has always been awash with ´black money´ - undeclared funds that sit under people´s mattresses or in safety deposit vaults.
This undeclared cash normally enters the system as the proceeds of Spanish property transactions. To avoid the capital gains tax on Spanish property of 18% (formerly 35% for non-residents), many Spanish residents preferred to accept part of the property price in the form of cash under the table. When you bear in mind the effect on Spanish property prices during the boom of recent years, this non-declaration of income saved the Spanish people the equivalent of millions of euros (if not billions) in unpaid taxes.The payment of black money was always an accepted process in Spanish property transactions – everybody knew it was going on, but everybody turned a blind eye. In Spanish notary offices throughout the country, there would always be a room that was solely used for counting cash.
Although the system is now under scrutiny and the exact details of every transaction is now carefully studied, a fair proportion of Spanish property transactions still involve the payment of an element of cash, particularly when both the buyer and the seller are Spanish – after all, it´s ingrained in their culture.
But here´s the interesting issue.
During these days of the credit crunch, it´s widely accepted that the banks in Spain (like everywhere in Europe) are desperate for funds. Just imagine if, for one month only, every Spanish resident was able to walk into their bank and deposit all of their undeclared cash – no questions asked, no tax to pay.
The banks would suddenly be awash with cash, millions of those hard-to-shift €500 notes would be back in the system, and the Spanish banks would be recapitalised, revitalised and, crucially, ready to lend again.
This exact scenario, an amnesty for those holding on to black money, was mooted by the Spanish opposition party last year, but was rejected as fanciful by Zapatero´s government.
Should be watching this space?
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