by Paul Gibson
Home >> Buddy can you spare me a dime?
This week’s Business Weekly decided to “burst the bubbleâ€? and “unveil the truthâ€? about Spanish wealth.
There is an ongoing debate among economic experts and especially among Spanish salespeople: why do Spaniards live so well? How can they spend so much money….and at the same time claim that they don’t have any? Yeah, I know what you might be thinking, but in fact, your opinion may or may not be in line with the truth.
The “land of opportunityâ€? is becoming more and more “the land of anonymity.â€? Why has Spain grown so much and salaries grown so little? The answer lies in some basic economic principles. Most of the wealth here in Spain is called “inherited wealth,â€? which has been passed on from generation to generation. Among our circle of friends, we hear the idea of “going to our summer homeâ€? for the weekend. Wait a minute! TWO HOMES! Why is everyone complaining about the cost of real estate…if they already have two homes? Well, there are actually two or three possibilities: You own both houses and are playing the “mortgage gameâ€? and paying one mortgage off by letting or renting out your other home. The second possibility is that your house is really your parents’ house or houses. Or lastly, you own your own house in the city and your “summer homeâ€? is actually the summer home for the entire family through “time-sharingâ€? agreements.
In any event, it never ceases to amaze me how Spaniards spend money. It seems like no one has a dime, and every time you turn around, everyone is traveling abroad, buying expensive cars, and buying the latest technological toys. So now we are back to square one!
Where does all the money come from? ....
Public entities all agree that “tourism� is the main contributor to Spanish wealth, but I have my doubts about that. Could it be that everyone has “a rich relative� who works at a bank and gets them a lucrative position at the bank? That sounds a lot more feasible.
Have we gone overboard with our idea about “allowancesâ€?? Let’s see. People live with their parents until they’re thirty…hmmm. I think we have our answer right there. If I save half of the money I make because I don’t have to pay rent, well… I could be a very rich man! I could even buy a house! ...
Finally, the other possibility is that we somehow participate in the “black market.â€? This means we earn very little money, but we don’t declare any of it! A lot of savvy businesspeople have learned a great deal about tax havens, corruption and embezzlement. In fact, some of them are real pros. Some say crime doesn’t pay, but oh boy, they obviously haven’t lived in Spain!
I give up…it’s hopeless. Can anyone shed some light on this subject for me?
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Posted on http://www.weeklyletter.com at 2006-07-04 11:00:00 +0200
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Hello Paul,
In Spain, we all know that there is money that is not controlled by Agencia Tributaria (called “B” money).
Some of this money comes from certain jobs and busnesses that are legal but hard to know how the business is doing like:
a) Dentists, all kinds of doctors, and so on the private field.
b) Video and DVD clubs, any store that rents goods.
c) etc.
How much money is not being declared by these businesses? This value (%) has probably not changed much for the last 15 years.
On the other hand we have the constuction and land speculation business widely extended, very profitable and …accepted by all of us?
Then, how come anyone solve it?
Best regards,
Cristina
Thank you for your comments Cristina. The Spanish Revenue Service is a labyrinth of complexities. Spaniards love to evade taxes. For those of us who rent, we are constantly paying rent in cash instead of via “ADP” or other automatic payment systems which banks use. No one wants anyone to know where they get their money…
The question is: are all Spanish businesspeople “SHADY” characters?
I remember a businessperson who also evaded taxes: Al Capone.
Spain has an important rising middle class that does not even have the opportunity to deceive Hacienda and yet has significant spending power. Those who do have the opportunity to deceive Hacienda already have enough money anyway; they could do without the money they hide from the government (i.e., this money is not what makes them rich).
To assume that all the money spent in Spain today is inherited or acquired in a dirty way is just not fair. First of all, it would imply that the generation before ours had so much money that they couldn’t spend it all in their lifetime and left it to us. Where did they get it?
Spain has plenty of hard workers and, though the lifestyle and means of professional advancement are very, very different from the way things work in the U.S., there are still self-made millionaires and if not millionaires, a bourgeoisie that can travel around the world, buy nice cars, provide the best for their children and go out for a nice dinner every once in a while.
Enchufes, on the other hand, exist across the globe. We may or may not criticise them but let not envy cloud our thoughts; we all take as much advantage of our “connections” as possible.
Also, we have surplus to spend on extras because we get a lot of basic things for free here (well, free meaning prepaid for through taxes)...because, for all its imperfections, the “European welfare state” machine does work.
Excellent comments Wes!
I was actually inspired to write this article by some comments of a few of my Spanish friends who are salespeople in Madrid. They were telling me how Spanish people always tell them “they don’t have the money” for this or that. And of course, to many people’s surprise, Merill Lynch came out and ranked Spain in the top 10 of the list of most millionaires per country.
How ironic! I agree that most millionaires are self-made. But that doesn’t mean that they don’t try and hide their money. As they say in Spanish “una cosa no quita la otra” or in English: “one thing is no excuse for the other.”
As far as inheritence is concerned, just ask the Countess of Alba – you know the one who is always in HELLO or HOLA magazine. She owns half the land in Spain… and oh yeah, that was through inheritance.
Thanks again on some great observations!
Thank you GINA! Great observation!
The welfare state and socialized medicine are real factors in this issue, so I would have to say you are absolutely right! As to the merits of the system…that may very well be a topic for another Business Weekly!
Hello everyone
I don’t know about other cities, but in Madrid I’m always seeing luxurious cars of at least ten million of the old pesetas. I think there are too new rich people who have made a fortune with the real estate business, due to people have to pay a mortgage with the 80 percent of their salary. In Spain there are much people with two houses, but I believe that it is a very small percentage, what it happens is that they make much noise but is not representative of the Spaniards.
Angel C (the president of …)
Excellent comments Angel C!
What really amazes most foreigners is to see the great number of BMWs and Mercedes Benz cars (don’t forget the TRUCKS TOO!) around Spain. I don’t know the exact percentage of people with two houses, but the amount of BMW, AUDI and MERCEDES has to be close to 70%.
SPAIN IS FILTHY RICH!