Spanish tax office delivers 300,000 nasty letters

The Spanish tax office began sending out letters headed “comunicacion” to foreign property owners a couple of months ago.  They have been causing a lot of concern to people who don’t understand what they say (they are in Spanish) or do understand but are worried by the implications.

To explain briefly to anyone who hasn’t come across this issue yet, these letters are notifications from Spain’s equivalent of the Revenue (Agencia Tributaria).  In essence they are saying  that they know the recipient owns a property but have not received tax returns from them.  They are not tax demands as such and do not require a response but they do suggest further action will be taken if the property owner receiving the letter really does have tax returns due.

It has been quoted that 300,000 letters have been sent  out.

I won’t go into detail about the matter as there is already some information about them out in the blogosphere and  I have posted a detailed Question and Answer guide on our main website:

What to do if you have received a letter from the Spanish Tax Office

I would like to clear up a couple of specific points which I haven’t read about elsewhere –

The letter claims that help will be available at your local branch of the Agencia Tributaria (Google your nearest).  I don’t know how true that will be in practice but it does open up the possibility of being able to resolve the situation without recourse to a professional i.e. paying a lawyer or accountant to catch up your taxes for you. 

If you want to take a DIY approach to the problem, firstly read up on the tax (our website has several articles on non resident tax – see the Advice page and use the drop down box).  The visit the tax office with all your documentation and see what they have to say.

Also you might wonder why the letter is asking for tax returns from 2007-2010.  There is a technical reason for this – the equivalent of a statute of limitations which prevents the tax office collecting unpaid taxes four years after they were due.  For example 2006 resident taxes were due by 30 June 2007 i.e. more than 4 years ago so not collectable. 

They didn’t ask for 2011 returns because they are not yet due.  2011 resident returns are due next June and non resident returns next December.

Would you prefer to live in an Indian slum or Middlesbrough?

This article on Sky News caught my eye. Anyone who has seen “Slumdog Millionaire” or one of countless documentaries about India’s slums will be amazed that shacks in Mumbai’s Dharavi slums are changing hands for upwards of £50,000.

My first flat in London (Hampstead 1994) didn’t cost that much more than 50k and my first flat in Spain (Valencia 1999) cost considerably less. Even now a quick search reveals over 600 properties in and around Middlesbrough for £50,000 or less.

What’s going on? Aren’t Indian slum dwellers among the poorest and most wretched people in the world? Didn’t I see kids in the movie swimming in human excrement? Less of that sort of thing in Boro than there used to be.

The Sky article gave part of the answer to the riddle of the pricey shacks: the slums are not quite the ramshackle hellholes that you might think. The Dharavi slum is a highly organized, functioning community with thriving businesses and properties that have housed the same families for generations. Over time the authorities have recognized their legitimacy and hooked up utilities. Most of all it is very close to the commercial heart of Mumbai (“location, location, location”).

But nevertheless India is a poor country despite rapid growth recently. How can people afford to bid up slum dwellings to such levels? The average wage is so low that Reebok recently announced that it was planning to sell a pair of trainers for $1 to get into the market. That does not suggest that India’s boom has yet created enough spending power to justify slum dwellings at UK prices.

The real explanation may lie in recent Indian interest policy. Rates have been as low as 3% and even now, with inflation needing to be reined in, Indian interest rates are only 7%. As is usually the case with these amazing property price stories, the root cause is lax monetary policy. We in Britain have seen such house price booms so many times before; they make everyone from the Finance Minister to the shack owner feel like they are economic geniuses until they end, as they always do, in tears and a painful bust.

Euro doubters are being proved doubly right

It seems absurd now but a decade or so the UK was very close to joining the Euro. Tony Blair’s Labour government, popular and trusted (yes, it was a long time ago), was pushing for it and only some stubborn resistance from Gordon Brown kept Britain out.

One of the key “pro” arguments was that interest rates would be lower. The pro camp was obviously hoping to sell the Euro with a bribe of lower mortgage rates. I remember thinking at the time that this was a hollow and short-sighted argument.

Lower interest rates are not a good thing necessarily. Interest rates need to be high enough to balance saving and spending. Set too low and the risk is of unsustainable booms and horrible busts.

The euro-sceptics pointed out that a single interest rate for Europe would be bound to leave some parts too high or too low rates with nasty consequences. Events have proved the doubters right of course but there is more to the story.

The arguments against joining were not wholly economic. Indeed the dangerous economic consequences of joining were a side issue for most opponents who feared the political logic more: the Euro was an irrevocable step towards a European superstate which rendered national governments almost powerless on the things that matter.

Pro-Euro campaigners either played down the loss of sovereignty as scare-mongering or argued that it would be a good trade off – slough off your little-Britain hang ups and reap the economic benefits, they said.

Now the Eurozone threatens implosion that position looks ridiculous: all 17 members face the prospect of ruin and disaster unless they join together in a fiscal union. Exactly what the Euro’s opponents predicted and the Euro-enthusiasts perhaps secretly hoped for.

What will this Eurozone superstate look like, if indeed it gets off the ground? Again you don’t need a crystal ball to see the shape of things to come. It will be hugely wasteful of public money, highly bureaucratic, damaging to business and most of all grossly undemocratic.

The citizens of the Eurozone must already feel like they are helpless onlookers watching their political elites flounder in the crisis that they themselves created. They can now look forward to permanent Euro hell as the price for preventing economic meltdown.

From our website: A guide to Spain's autonomo system