The famous expression 'Black Money'
seems to be on everybody's lips. However people are becoming
increasingly more worried about changing their money from
pesetas to Euro's in the sense of not having declared this
money.
There exists three important
periods on the way towards the transition to the Euro:
1. Temporary period.
From the 1st of January 1999 to the 31st of December 2001.
During this period the Euro will not physically exist but
it has a fixed exchange rate of 166.386 ptas per Euro. The
Euro will be obligatory in certain sectors like exchange rates,
the national debt, and also in the stock market.
Experts estimate a volume
of black money in Spain at an amount between three and four
billion pesetas.
The Black Economy is estimated
as at least 10% of the Gross Domestic Product.
2. Period of Exchange.
This starts on the 1st January 2002 and will last for a maximum
of six months. During this period it will be the obligatory
currency in the accounting notes. The pesetas that have not
been changed for Euro's at the end of this period will only
be able to be exchanged in the Bank of Spain.
The questions that arise
are the following:
Will the fiscal authorities
discover the money that has not been declared and if so should
taxes be paid on this money once it has been discovered?
Will the fiscal authorities
impose fines and even be considered and even be considered
as a fiscal crime? |
1. There is a community compromise in
the European Union that has been approved in Amsterdam so
that each country can employ their own methods to control
the undeclared money. Governments will be able to relax
the exchange controls.
2. The solutions that the European Community
Countries decide upon will be common and unique with the
purpose of avoiding comparative grievances between countries,
with the aim of avoiding the possibility that one country
may be too strict and another too soft in this matter.
3. Fiscal Amnesty has been discarded.
It has been accepted that no country will squeeze its black
economy too much in an economically good period. However
it remains very clear that every country will continue to
pursue black money generated by criminal activities (drug
trafficking etc).
4. Since December of 1993 a law has existed
that limits the amount of money to be identified in the
name of bank clients. This limit is 2.500.000 pesetas or
the equivalent in the exchange.
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1. Black money is being used for the purchase
of consumer goods and luxury services. From 1998 onwards
there has been a big increase in the sales of yachts, luxury
cars etc.
2. Investment. Many people and companies
have opted to invest in the property sector (second hand
houses, land, rural property, buying of gold and the stock
market). This is not a final solution because in reality
it is only postponing a problem that will arise in the future.
3. As a last resort the purchase of winning
lottery tickets of draws is a system used to justify money
from criminal activities.
In the canary Islands companies and businesses should not
consider generating black money because fiscal laws are
very favourable in the sense that profits can be reinvested
without paying taxes (for example reserves for investments
in the Canary Islands).
Finally it should be mentioned that Spain has been designated
for one year the Presidency of the International Finance
Group against the laundering of black money, as from July
2000.
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THE
EURO AND 'BLACK MONEY' (UNDECLARED INCOME)
July 2000
Reflections
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