Hacienda wants to legalise cannabis and prostitution to claw back 10 billion euros extra in tax

Latest estimates by the tax office, Hacienda, prostitution and established brothels in Spain have an annual turnover of around 18 billion euros and, if this were taxed at 30 per cent, would mean an extra six billion a year clawed back for public funds.

The same would be true if cannabis was legalised as a recreational and therapeutic drug, since it would generate a huge hike in tax income and reduce the problem of illegal dealers and the associated crime and violence, says Hacienda.

As a result of cannabis and prostitution becoming legal, Spain's Gross Domestic Product (GDP), which is barely one per cent at present, would rise to around 4.5 per cent.

From the beginning of June, the National Statistics Institute (INE) will be obliged to include drugs and prostitution in its GDP forecasts, as have a number of other countries in Europe, and say that so far these illicit activities generate about three per cent of the country's income, or around 30 billion euros.

Tax inspector Domingo Carbajo says there is 'a lot of hypocrisy and misplaced morals' surrounding the issue.

Other measures mentioned include scrapping 200-euro and 500-euro notes from circulation, pushing for more businesses to accept credit and debit card payments and discourage cash by placing restrictions on these, obliging banks to provide identity details of their customers, exchange of information between countries, and between the Social Security office and the tax authorities.

Hacienda claims that companies in Spain with branches elsewhere in the EU which have lower taxes are gaining advantages by arranging financial transactions through the foreign branches – for example, tax on profits, or Impuesto sobre Sociedades, payable by all registered businesses in Spain, is 30 per cent – but in The Netherlands, it is five per cent, meaning Hacienda wants to be able to find out about these transactions so it can claw back the additional 25 per cent.

Tax inspectors want to see the threshold between tax evasion as a civil and criminal offence raised from 120,000 euros to 600,000 euros to save time and money all round, but Hacienda's management committee, GESTHA, says it should be reduced to 50,000 euros.

Otherwise, it points out, a person could defraud the tax office 150,000 for three years running and still escape prison because it was below the 300,000-euro threshold, even though, under current law, they would have committed three criminal offences.

GESTHA also wants to see tax crime expiry under the statute of limitations rise from five years to six.