Is it likely that a pensioner or employee will have higher earnings than a business? If the tax returns for last year are anything to go by, it would seem that this is the case. From the figure produced by the tax office it would appear that paid workers and pensioners declare an income on average of 17,793 euros, which is 74% more than that declared by small and medium sized businesses and independent professionals who declare an average of 7,591 euros income. An upside down world or tax fraud? The fraud investigation department of the Tax Office has looked at returns for 2008 and the data shows that the small and medium sized businesses declared an average of 10,202 euros compared to the 12,149 euros declared by self-employed workers in the same period.

The problem is not confined to the Malaga region and, although the difference between the groups is less pronounced in the province as a whole, with a difference of 6,763 euros between employed and businesses and some 5,380 euros difference with the self-employed compared to the Malaga region with 7,200 and 7,665 euros respectively. Figures also reveal that there has been little or no increase in the amounts declared between 1993 and 2008, even allowing for the economic crisis.

According to the investigation, the figures clearly indicate that the tax authorities are losing the battle against the black economy and concentrating more on the employed and self-employed, not the larger corporations and the independent professionals where the bulk of the fraud takes place. Most commonly IVA is not charged on sales, personal costs are passed on as business costs and, in some cases, invoices are falsified. The study showed that these types of fraud happening in small businesses and self employed represented just 8 per cent of the total, while the lion’s share is carried out in the larger organisations.

Strategy change

It is clear from the figures produced that 75 per cent of taxes paid come from employed people and just 25 per cent from the business sector. To counteract this situation, it is suggested that the Tax office, which has previously targetted the easiest sector, the self employed and small businesses who are not employing the services of accounting companies, tax experts and lawyers to increase and protect their profits, should look at the actions of the larger organisations and take greater control of the grants and public monies that are claimed. A change of strategy that, if the calculations are correct, should go some way to redressing the balance and increase the taxes paid into the coffers from this sector.