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Hacienda Officials enter Ushuaïa. Photo Vicent Mari.
  • Ibiza News: Tax Agency Raid Finds Millions in Cash at Ushuaïa and Pacha
  • Two more of Ibiza’s big names come under investigation as part of operation Chopin

Tax Agency Raid

40 officials from Spain’s Tax Agency, the Hacienda, and officers of the National Police have undertaken raids on two more of Ibiza’s biggest names in the clubbing/entertainment world.

Both raids were undertaken by teams including tax inspectors, technicians and security personnel some of whom were armed with sub machine guns.

The raid at Pacha started at 6.30am on Thursday the 15th of September, shortly after the club closed for the night.

The raid on Ushuaïa followed a short time later and included both the hotel and outdoor pool club complex in Playa D’en Bossa, and the Matutes group headquarters in Ibiza Town.

The inspection raids were authorised by the Administrative Court No. 1 in Mallorca as part of the ongoing operation Chopin. The inspectors were at both premises until the early afternoon.

The Diario de Ibiza reported that a spokesperson for the tax agency said that they had counted several million euros and that “Now we must check that all this amount of money corresponds to what the companies state in their accounting records”.

On July 8 the operation Chopin teams raided 87 nightclubs in Spain simultaneously. It is estimated that those 87 account for 20% of Spain’s total revenue in the clubbing sector.

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Agents approaching Pacha in Ibiza Town’s Marina Botafoch. Photo Vicent Mari

The July 8th Chopin operation was the biggest ever made by the Tax Agency into tax fraud and involved the deployment of more than 500 staff.  Huge amounts of black money were found stashed away or made up in prepared envelopes to pay staff wages and other expenses. The Hacienda operation was launched in light of what were considered to be an abnormally high level of card payments to cash payments for that business sector, so leading to the assessment that much of the cash taken was not being declared.

The tax office has not released any information on the findings yesterday, however it is reasonable to assume that businesses in that sector will have been alerted by the Hacienda’s actions on July 8th and would have had ample time to ensure their financial accountability would stand up to an inspection.

Read the report on previous raids at Privilege and Space here http://theibizan.com/news/lunch-money/

Editorial comment:

It is such a strange situation in Spain compared to what those of us originating from the UK are used to. Spain’s black money (undeclared) white money (declared) is so widely known and understood that it is almost institutional.

You have to expect that having been given such a ‘heads up’ by the earlier stages of operation Chopin, further identification of black money hauls will be reduced and the longer the operation continues the less effective it will become. But whatever the outcome of these and future raids is, it does not alter the fact that it still goes on. Aside from a few exceptions such as online and corporate retailing, banking etc, the practice is still widespread. It is quite normal to ask or be asked whether a financial transaction is to be undertaken ‘black or white’. 

On balance my view is that in the twenty years I have been closely connected to Spain, and the decade I have been resident here, the practice has certainly reduced – but the level at which it still exists must have huge impact on the Spanish economy to the extent that published figures for GDP etc are notional at best.

The tougher stance taken in recent years by the tax office has created a third option in Spain – which I will call, unimaginatively but appropriately, ‘grey money’.

At fear of the fines imposed for dealing in Black, many transactions are now undertaken by doing all the right paperwork, but only showing a fraction of the actual amount involved.

In employment this will often be a contract on the minimum amount prescribed for that job, with an amount paid on top in Black money that makes the wage up to the market rate. With Spain’s minimum wages tied to particular occupations, and some of those rates being very low, it is often at least 50% of the real wages paid that is still going on in Black Money.

In property purchases it is commonly known that deals struck will include a Black money element paid in cash in a briefcase. Though I cannot state I have seen it with my own eyes, it is widely said that the Lawyers concluding the deal will ‘leave the room’ while this aspect of the financial transaction is completed.

The clubbing sector may have always been one of the businesses most able to profit from Spain’s cultural acceptance of a black money white money system, but its reach and consequences spread out far wider into all aspects of Spanish life.

The question is not so much whether these particular businesses may be breaching tax evasion laws. The question is how few of Spain’s businesses are not?

And the state cannot claim to have clean hands either.  Faced with tough and many would say unachievable monetary targets set by the European Commission, Spain increased its GDP by a huge 9 billion euro margin from one accounting period to the next, simply by including assessed revenue of prostitution and illegal gaming – effectively state sanctioned acceptance of that huge black money sector (plus the most blatantly corrupt bit of creative accounting since 20s Germany said ‘let’s just print a shit load more cash’).

It goes from top to bottom, everyone is at it, even the government when it suits them. 

And talking of ‘everyone’, we cannot avoid our own part in the Black Money White Money system. Our part as private citizens. Who among us can say they never deal in Black Money to their own advantage? 

Somebody responded to the first draft of this article saying “there’s a bit of a difference in mere mortals and having millions of euros in shoe boxes and cooler bags”.

Is there though?

If each Spanish citizen conducted just 100€ financial transaction in black money per year (and that’s damn conservative) and that money was excluded from taxation at an average 25% (also damn conservative as iva alone is 21%) the revenue lost by their exchequer would be 1,169,250,000€

1.2 billion euros through exactly that mentality of ‘what i’m doing is inconsequential’.

I am not trying to pass blame onto the man on the street here, but I am saying it is an issue of collective responsibility. The clubs are an easy and unsympathetic target, but it is not a social evil that lies entirely at their door.

To change the black money culture requires hearts and minds, not just clubs and fines.

Nick Gibbs