View Full Version : Spanish attitude towards cash
20th April 2006, 05:04 PM
There was an interesting article in today's Grauniad (http://money.guardian.co.uk/news_/story/0,,1757055,00.html).Spain's government said yesterday it had ordered an investigation into how the country was soaking up a quarter of one of the world's largest denomination bank notes, the €500 (£345) bill.
... The €500 notes are popularly known in Spain as "Bin Ladens" because like the al-Qaida leader, everybody knows they are around but hardly anyone has seen them.
Is it really that bad? Do Spaniards really hoard lots of cash? Is the building/construction industry really responsible for what appears to be shady dealings?
20th April 2006, 09:16 PM
Every time someone buys a house in Spain anywhere between 5 and 40% of the price is paid in 'negro', or 'b' money, i.e. under the table. So if a house is worth 300,000 euros, maybe 250,000 will go onto the contract and tax will only be paid on that amount. The other un-taxed 50,000 will be handed over to the seller in cash, once the Notary leaves the office and contracts have been signed. That's when those nice 500 notes come in handy! More money for less bulk! These then get hidden away, or slowly paid into banks, but are hardly ever seen on the street.
20th April 2006, 10:09 PM
That's tricky, is there no crackdown on it, or is it just too difficult to catch?
21st April 2006, 08:16 AM
As Ben said, most of the 500 euros notes are used as "black money" or "b money" and a big percentage of it is used in the house market. For you to have a clearer idea of what is going on in Spain here is some additional information:
The price of houses in Spain has been growing around 15% per year for the past 6 or 7 years, some years even more, for this very reason is the best investmenet available.
For example, in 2005 the price of houses rised 16.7% and over the last five years 82.7% while salaries only rose 18.2% over the same period.
Lots of people buy flats, keep them close for a couple of years (or even more) and then resell them at a much higher price. While all of this flats lie empty, prices have gone up so much that it's very difficult for young people to buy a small flat with their salaries. And for a single person or a couple with only one salary it's just impossible.
23rd April 2006, 09:17 AM
A further complication with property is that future taxes to the local council for rubbish collection etc. are based on the declared value of the property so you are "saving" money for a long time to come if you under-declare. The local councils are supposed to revalue property every ten years but a lot don´t and with the values rising as Marina has pointed out the valor catastral as it is called may be vastly different for similar properties depending on whether they have changed hands or not. The authorities do have the right to use a "market value" to assess taxes I believe. Javea on the Costa Blanca have recently tried to revalue and the inhabitants have been up in arms as some of them will face huge increases in tax with €50,000 properties now worth €450,000. I remember a similar thing happening in the UK some years ago.
I think a lot of black money seems to change hands in the building & service trades based on my experiences. Typically you get a quote for €4000 with IVA (VAT) plus €2000 without! About the only way to stamp it out is an army of inspectors - or maybe ban cash altogether!
Anyway it´s what makes living in a different culture interesting.
23rd April 2006, 01:56 PM
My mother in law has also told me that when they went to the euro, many people in the black market sunk their ill-gotten gains into real estate. Perhaps this is a large contributing reason for the ridiculous price of real estate today?
23rd April 2006, 03:47 PM
Some of the hotstals I use demonstrate a marked reluctance to me paying my bill with a credit card. They much prefer cash. This is, however, after they have accepted my initial booking on-line with a deposit paid with the card. Normally they accept if I agree to a 3% mark-up. It's worth it to me. I am not going to pay up three or four hundred euros in cash. I just don't walk around with that sort of money in my wallet. Certainly not in Madrid anyway.
24th April 2006, 07:56 AM
Guesss what ....we have a house in spain and we had to pay a tax to paint the out side LOL and another to remove the old Linme that was crumbling ....but i would still rather be here than in the UK.cause we pay to may taxes for everything,
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