Spain has a hefty 18% VAT -- every single item costs, essentially, 1/5th as much as it inherently does because Uncle José takes a cut. The country obviously needs the tax, given the economic meltdown following the Spanish housing collapse, but 18% is a big price to pay. So this creates some incentives to try and avoid paying the tax.
This is a common dilemma. In the US, large corporations actively seek out and exploit loopholes to avoid paying their taxes. They also lobby politicians to place new arcane loopholes into the tax code so they can exploit them. It's a sweet setup, though it's amazing that companies can behave as if they answer solely to their own shareholders and carry no obligation to the society in which they operate. But when it comes to regular people, the US has a culture of full compliance with the tax code. I suspect nearly everyone pays their taxes in full. Maybe, just maybe, wait-staff might under-report their earnings. But you'd get very strange looks if you walked into a supermarket and asked the cashier if you could pay in cash and avoid sales tax. Only a small group in the lunatic fringe go the extra mile to conduct transactions "off the grid," and in true American style, they've come up with creative solutions such as local currencies to keep the money off the tax records. The grand-daddy of all these currencies is something called Ithaca Hours, where a piece of local scrip entitles the holder to an hour of services by an Ithacan -- the exchange never enters the accounting systems (SAP and PeopleSoft would probably keel over if you tried), the taxman never finds out.
In Mallorca, I've noticed that the locals almost always pay with cash and don't charge each other tax for services. Normally, the taxmen would do a sting operation and catch people who are running dual books, but on an island this small, where everyone knows everyone else, the merchants would immediately know who the undercover cops are, so there can be no sting operation. It's like they have a social moat around their island.
I got an 18% discount at a marine store. I've made it into the inner circle.
This is a common dilemma. In the US, large corporations actively seek out and exploit loopholes to avoid paying their taxes. They also lobby politicians to place new arcane loopholes into the tax code so they can exploit them. It's a sweet setup, though it's amazing that companies can behave as if they answer solely to their own shareholders and carry no obligation to the society in which they operate. But when it comes to regular people, the US has a culture of full compliance with the tax code. I suspect nearly everyone pays their taxes in full. Maybe, just maybe, wait-staff might under-report their earnings. But you'd get very strange looks if you walked into a supermarket and asked the cashier if you could pay in cash and avoid sales tax. Only a small group in the lunatic fringe go the extra mile to conduct transactions "off the grid," and in true American style, they've come up with creative solutions such as local currencies to keep the money off the tax records. The grand-daddy of all these currencies is something called Ithaca Hours, where a piece of local scrip entitles the holder to an hour of services by an Ithacan -- the exchange never enters the accounting systems (SAP and PeopleSoft would probably keel over if you tried), the taxman never finds out.
In Mallorca, I've noticed that the locals almost always pay with cash and don't charge each other tax for services. Normally, the taxmen would do a sting operation and catch people who are running dual books, but on an island this small, where everyone knows everyone else, the merchants would immediately know who the undercover cops are, so there can be no sting operation. It's like they have a social moat around their island.
I got an 18% discount at a marine store. I've made it into the inner circle.
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