By Martin Delfin. Memo from Madrid
When the taxman comes, he may not give what many would consider enough fair warning. He will just slip into your bank account, take what he says is owed to him and let you figure out your next move. This is what has been taking place over the past few mon
ths as the Spanish Treasury clamps down on those who owe the government money.
With the government grappling with a still-inflated deficit and the economy almost at a standstill, there’s a lot of money to be collected from those who haven’t paid their share. According to the AEAT tax collection agency, inspectors believe that the amount of unpaid taxes by private citizens that have accumulated over the years is so high that it could reach into the billions.
For many decades, Spain had been burdened by a bureaucracy-clogged tax collection regimen hampered by a non-automated record-keeping system and lack of personnel and commitment. Tax evaders took advantage of this situation by fudging their accounting, putting down more deductibles than allowed, and stashing away cash in other places just to keep the government from getting their money. Spain had one of the weakest collection systems in Europe so that only the boldest, most outlandish cases of evasion were ever prosecuted. For those who owed a few thousand euros, it would take years before the taxman would come knocking on the door and that was only if by chance the statute of limitations on collections hadn't run out. But now that seems to be changing and is being done so very quietly.
Last month, one of my good mates asked me to accompany him to the AEAT tax office in Madrid after he went to pay his rent and found that his bank account had been frozen by the government. My American friend isn’t too swift with his Spanish and wanted me to go along so I could interpret anything he couldn’t explain. The lady auditor at the AEAT office was pleasant and understanding (aren’t all tax auditors suppose to be evil and nasty?), and explained to my mate that he owed more than €1,000, plus interest, stemming from income he had earned as an English teacher, which he didn’t report, but that the school that he worked for two years ago did.
He argued that he had not received any prior notice from the AEAT advising him that his account ran the risked of being blocked otherwise he would have taken action. The lady countered that the notice had been sent by certified post - those were the yellow pieces of paper he had ignored in his post box - and his case by law had been listed in the deadbeat column published in the official BOE gazette. Who in the heck reads the BOE? She was kind enough to unblock his account and allowed him to make arrangements to pay “less than half” of the debt through financing. A colleague had a similar problem and also discovered his bank account had been frozen a few weeks ago.
But there are more serious cases. Last month some 1,500 account holders at the Swiss bank HSBC were issued summons to appear before AEAT auditors to see whether their money deposits in Switzerland actually amounted to evasion. AEAT had given the holders of an estimated 3,000 HSBC accounts a June 30th deadline to clear up their situation and pay any due taxes on the deposits or face legal action. It is expected that many will be prosecuted for evasion within the coming months. And this summer, we learned about the extraordinary investigation being conducted into the finances of octogenarian Catalan beer baron Demetrio Carceller Sr., who for the past 15 years had misled Treasury officials into thinking that his main residence was in Portugal to avoid paying high taxes on his fortunes (The News, July 14th). Investigators believe that Carceller, the owner of Damm brewery, stashed away some €500 million in offshore accounts. His advanced age has kept him out of prison so far, but his assets have been frozen.
As the old adage goes, death and taxes are the only two things that can be certain in life. There are many people in Spain who have made a lot of money since this country joined the European Union. And even more so when the euro was introduced and property speculation became financial wizardry. It is admirable that the government has decided to take the upper hand and go after those who owe AEAT. But at the same time it is disheartening that the Treasury’s current wrath has only been abetted by the government’s own disastrous finances. Spain’s tax collection system needed rigorous overhaul years ago. If that had happened, then maybe the Spanish government would have had a bigger cushion to soften the fiscal wallop and citizens could feel more at ease knowing that they had already paid their fair share.
Martin Delfin writes for the English language version of El Pais
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