There is a long way to go

Black economy in Spain represents a 23% of its gross domestic product according to wikipedia, and this is (according to the spanish National Statistical Institute) more or less 1,000 millard euros (ironic) Unbeliable! in Europe, black economy is around 10 points lower.

Spain is going to rise its fiscal pressure in order to collect extra 11 millard euros.

So my question is: why don’t try to reduce our black economy in order to collect more taxes instead of increasing the fiscal pressure? With a bold calculation, I’d say that 23% of 1,000 millard euros is 230 millard and 16% (our current “usual” VAT) of these 230 millard is 36.8 millard euros. So we only have to reduce in one third our black economy to maintain everything in its same “status quo” or even have a lower fiscal pressure. In brief, in my opinion, this is a problem of a bad execution of a policy, no a problem of the policy (and its percentages) itself.

Ok, beautiful sugar and spice world so far. Someone should tell me: “ok, show me the code” (geek expression to say: “show me the solution”). Maybe, I have a biasing technical background, but my solution is simple and ambitious: let the tax office “emit” (and therefore receive) every invoice in the country, and give a special and unique code to these invoices. Companies would use a government service to emit their invoices, receive other companies’s invoices or check the rightness of the printed invoices.

Small tax dodgers

What I would get with this? Every small tax dodger would be identified. In Spain, if your total turnover to a company is less than 3000 euros, you can keep a low profile and don’t be detected by the tax office. And you can do this dozens of times.

Big tax dodgers

However, these are only goldfishes, what about the sharks? The problem here is that the man in the street need an incentive. Currently, if they don’t pay VAT, they are saving 16% of the retail cost, and that could be an amazing amount of money. What could be the incentive? Let them to keep the saved VAT and the fine (+50%), if they detect and report a valid VAT fraud (this is fair, the tax office wouldn’t collect that tax and maybe they wouldn’t fine the offender). The saving for the customer would be greater, and tax dodgers would be afraid of making tax evasion.

Fake invoices

What about fake invoices? With this proposal, suddenly, we would have more than 20 million of tax inspectors trying some sort of “scratch-off lottery”, playing in the tax office’s website with this unique code in the invoice. At this moment, “everyone would be the tax office” (Spanish tax office’s motto) and fake invoices to final customers could be checked by themselves.

Collateral effects

The country (as a whole) only would have to create the invoices once. Companies only would have create their own invoices, external invoices would be downloaded, saving time and money.

The tax office would have all the documentation they can imagine in an electronic support in order to fight against fraud.

“prizes” for citizens could be deducted from their income tax, so the tax office would gain the interest generated between the moment when the fine is paid and the moment when the citizens declare their income tax.

Citizens would have an extra income, reactivating the consume.

This would be a step ahead of our current “electronic invoice” . Some kind of strategic outlook.

Investment

The model of the electronic invoice has a size of 22kb (gzip compressed). If we suppose that the actual invoices won’t be bigger than the whole model, and that the average invoice is around 150 euros, you would need less than 140 TB every year to store the information of every invoice in the country (Facebook manage 25TB of data, per day!)

Feedback

How crazy is this idea?