Anti-fraud drive targets tax evaders rich in EUR 500 bills

14 February 2008

MADRID – Seven out of 10 financial transactions in Spain involving EUR 500 bank notes may constitute tax fraud, the head of the Spanish tax office disclosed Wednesday, announcing a new drive to root out tax evaders who have been using Spain’s overabundance of high-denomination bank notes to hide from the taxman.

Luis Pedroche, the director general of the Internal Revenue Agency, said tax inspectors are working overtime to sift through suspicious transactions carried out in fiscal year 2003 in order to begin investigations before the agency’s statute of limitations expires in June.

Of 4,195 large financial transactions involving EUR 500 bills in 2003 that are known to the agency, around 70 percent are suspected of being fraudulent, Pedroche said.

The agency is concentrating its inquiries on transactions involving at least one thousand EUR 500 bills worth a total of EUR 500,000, most of which are carried out by companies rather than individuals and fall into certain patterns that suggest they may be fraudulent. Pedroche noted that most of the suspicious transactions are concentrated in the real estate sector, where marking down the declared value of properties is a common method of evading capital gains taxes.

On the back of a decade-long real estate boom and with a black market estimated to constitute between a fifth and a quarter of GDP, Spain has the highest concentration of EUR 500 bills in the European Union, approximately 25 percent of the total.

Pedroche said that last year inspectors reclaimed almost EUR 6 billion in evaded taxes and have recovered EUR 19.4 billion since the agency stepped up its fight against tax evaders three years ago.

Subject: Spanish news