Spain’s ‘black’ economy worth 20 percent of GDP

The value of Spain's underground economy shot up in 2008 but has stabilized at about 20 percent of GDP since 2010, the country's Foundation for Financial Studies (FEF) said on Sunday.

That figure is higher than everywhere else in the European Union except Italy, where the figure is 21 percent, the private research body said.

In Germany, the so-called 'black' economy is valued at 13 percent of GDP, while it is a far lower 10 percent in both France and the United Kingdom.

In terms of Spanish industries, the rate of under-the-table activity is below 10 percent in the financial sector but up around 35 percent for construction, FEF said.  

The FEF said Spain's tax office is missing out on somewhere in the region of €18 billion to €20 billion because of this illegal economic activity.

The foundation also argued that this black economy provides work to at least a million Spaniards.

The president of FEF Juan Carlos Ureta, said the presence of this second economy gave a false picture of Spain's economic position.

"It looks like we have more unemployment than we do, and more fiscal deficit than we do, and this lessens foreign confidence," said the Director.

FEF recommends the creation of German-style mini-jobs, or jobs where people work up to 40 hours and earn up to €400 a month.

This would help people move into legitimate jobs, the think tank argues.

FEF also believes tax brackets should be simplified and that marginal personal tax rates should be reduced.

At the same time, they are calling for a cut in company taxes.

FEF analyst Ramiro Martínez also added the level of bureaucracy is a serious barrier to Spanish businesses looking to go legitimate. 

FEF promotes itself as an independent research group. Supporting institutions include clothing giant Inditex, telco Telefónica and consultants KPMG among many others.