More coffin nails for the Spanish economy?

Spain has always been a long way behind when it comes to making efforts to ban smoking from public places. When I first started to live here I was amazed to find bank tellers and government officials smoking while they attended you. I was outraged when I went to register the birth of my first child and found the Registro office so smoky that my 2 week old baby had to be kept out in the corridor while we attended to the paperwork. A year or two later when I helped set up a play centre in the local town, I had to accept that smoking would be allowed in the café or “no one would come”. But it seems this is about to change and Spain is about to get some of the toughest anti-smoking laws in Europe.

After a botched and watered down attempt at a ban on smoking in bars and other public places a couple of years ago, this new “antitabaco” law looks like the real deal. The new law would, from 2^nd January 2011, ban smoking in all bars, restaurants and other enclosed public spaces with very few exceptions. Also some outdoor places like the grounds of health centres and playgrounds are included in the ban. Terraces attached to bars which are not enclosed by three or more walls will be exempt. There are exceptions for some private clubs and certain proportions of space in hotels and prisons.

Another victory for health campaigners then and, despite not being militantly anti-smoking myself, I think on balance these kinds of laws quickly become accepted as the norm and the vast majority of people – smokers included – find them an improvement after a short time. The issue though is less about smokers’ rights and more about the effects on business, specifically the large and vitally important catering and hospitality industry which has been lobbying against the ban. Some people also think tax revenues from cigarette sales will hit the government’s finances and tobacconists are expected to suffer.

"The new law enrages barowners "

http://noticias.lainformacion.com/noticias/la-nueva-ley-antitabaco-enfada-a-hosteleros-y-estanqueros_L35ilG1cO6AdcBznocQyv3/

There could be something in these economic warnings. The Spanish economy and the government’s finances are in a precarious enough state and the UK’s experience that banning smoking, however desirable public health grounds, has had a negative effect on takings at some types of premises. I haven’t heard restaurants or hotels complaining about the smoking ban but pubs and clubs have certainly seen revenues decline over recent years. Not all their woes can be blamed on the new legislation: social trends which go back decades have left traditional pubs and places like working men’s clubs and bingo halls losing market share. The recession has taken its toll. We have been drinking less and less beer as a country for years. And there is more competition, including websites and the lottery in the case of bingo and supermarkets in the case of pubs. Some pubs, like the Wetherspoons chain, have taken on the decline and changed their offerings to, for example, capture the breakfast and coffee crowds.

What does all that mean for Spain? I think the effects could be quite significant. The small café and bar is a staple of Spanish life as, sadly, is unabashed smoking in front of other people. I can see the firm ban hitting business and shutting some of the weaker establishments. This is not a justification for putting off doing something that could save lives and set a better example for children but it’s one more reason to think 2011 won’t see any kind of rapid turnaround in the Spanish economy.

related http://www.independent.co.uk/news/uk/politics/smoking-ban-should-not-cover-pubs-and-clubs-2105331.html

From our website -

Spanish tax forms explained

Is there such a thing as an autonomo free lunch?

Going self-employed in Spain - "autonomo" in the local parlance - has many attractions for foreigners living here, not least of which is that good paying contracted jobs are in short supply, particularly for foreigners without much Spanish. Many foreigners in Spain run their own business, er, "informally" without registering or paying any tax but would prefer to be legal either because they fear investigation and prosecution or because of the limitations of working in the black economy e.g. not being the equivalent of "VAT registered" and being able to issue proper invoices or not being able to sign a lease, take a loan or employ people.

That all points to registration and formalising your business but many people are put off by the taxes and social security. Without going into massive detail (there is a guide on the firm's website which covers all of this - Autonomo Guide) the main sticking point is social security for most people. It is a minimum of 251€ per month and can be more if certain unemployment, sickness insurances are taken in addition to the basic cover. Even if you don't make a profit (or make losses) this monthly payment never goes down, although younger autonomos can get a 30% discount for their first 15 months registered.

The "solution" if you want to register as autonomo but don't fancy this hefty outlay is sometimes touted as opting out due to low earnings. Spain has a national minimum wage and theoretically autonomos who earn less than it can apply to opt out of social security. But there are conditions which make it only applicable to a minority.

- you must always earn under the minimum wage so anyone earning irregular amounts which sometimes exceed the minimum could not apply

- you must be working occasionally - if you are doing a regular contract or regular work you cannot apply

- you cannot have a permanent place of business

This is why the bulk of people continue to have to pay social security if they are self-employed in Spain. Besides unless you pay into the system you cannot apply for the benefits, mainly health and pensions related which could ultimately be worth hundreds of thousands of euros (see article Spanish pension benefits )

When will the Spanish pensions system collapse?

You might notice my deliberate and provocative use of the word "when" in the title rather than "might" or "if". I have just been doing an article for my website about Spanish pensions ("Spanish Pension Benefits") and was shocked by some of the figures I found during my research.

The article talks about how much someone in Spain can expect to get by way of a state pension, the answer being somewhere between 340€ a month up to nearly 3.000€ a month if you have made the maximum contributions. The majority will I guess be retiring on something between the minimum and double that, and bear in mind that in Spain you get 14 monthly payments (double at Christmas and Summer holiday time which is a nice system I think.

Not overly generous then but as everyone knows there is a pensions timebomb ticking in every developed country due to population ageing. Spain's ageing profile was what really surprised me and it is this and not the generosity of the payments that will sink the system. These are some UN figures comparing the ratio of working age Spaniards with oldies in 2050 with the ratio at the turn of the century:

2000

Spain Working age (15-65) 27 million

Spain retirement age (65+) 7 million

Spain ratio - 4 workers to every pensioner

2050

Spain Working age (15-65) 16 million

Spain retirement age (65+) 12 million

Spain ratio - 1.4 workers to every pensioner

(source UN Ageing Report

http://www.un.org/esa/population/publications/worldageing19502050/)

So, Spain has an 11% public sector deficit now ( ie is borrowing to pay current pensions) and that is barely 10 years into this dramatic demographic shift. It seems inconceivable that Spain will be able to finance state pensions with 11 million fewer workers and 5 million more pensioners. It just can't happen. So what will happen?

A big shift towards encouraging rather than deterring immigration? That may partially happen but the problem is rich countries tend to attract the poor and unskilled who may not exactly be an unmitigated economic boon.

Cuts in benefits and later higher retirement ages? For sure and these are being talked about at the moment with a report from 100 economists suggesting reforms along these lines (http://www.valenciaplaza.com/ver/10894/El-modelo-sueco-y-los-100-economistas.html) but the reforms seem quite timid, with a rise of only 2 years in the retirement age and an increase of 5 years in the number of years' contributions required to get the maximum pension (it is now 35). Hardly enough to rescue the system you would have thought.

Essentially the government is making promises it cannot keep and cannot renege on explicitly for fear of a political backlash. The outcome will eventually be a default on its pensions promises by stealth - pensioners will get the nominal pension they have paid for but the government will borrow and print the money to pay for it so inflation erodes its effective value. At some point in the next couple of decades 70s style inflation will wipe out much of the real value of state pensions.

Other recent articles: Spanish non resident tax

10 reasons you've got to love the internet

It's funny how it was only after the Dot Com bubble that the internet really took off for ordinary people. Lots of crumby online businesses came and went (bankrupt) and we were mainly left with Amazon, eBay and online travel booking. A lot of the good stuff has only really become ingrained since broadband became ubiquitous in the last 5 years. I couldn't believe it when I read YouTube was only 5 years old the other day; it seems to have been around forever. That site is one of my top ten reasons why the net is now ingrained into my life and doing without a connection would be unthinkable, like losing water or electricity. Here's my list (in no particular order) of 10 reasons the internet has made life better:

1. TV on demand

A really recent one this because it was unthinkable just a couple of years ago when there wasn't enough bandwidth to contemplate everybody streaming TV shows over the internet, but now with 4OD, iPlayer and countless others, it is routine to get almost any viewing you want, when you want. Now that these services are being improved and built into TV sets (Virgin already do it) you can never complain again that "there's nothing on". Annoyingly much of the UK material is not streamable in Spain.

2. Settling arguments

There used to be a time when petty arguments over silly things could fester unresolved indefinitely but now the ultimate resolver of disputes is on hand to hand out judgement. I once had a passionate dispute with someone who was convinced that 9/11 occurred in the 90s and it was only when I brought up (several) news reports that they backed down. I have lost plent of arguments in a similar way.

3. Travel

When did you last go to a travel agents? How about checking in online? How much do you think flights would cost today if the internet hadn't happened.

4. Business

The 1980s and Mrs Thatcher did a great deal for small business and entrepreneurs. The internet has done a lot more.

5. Music

The reason I love YouTube so much is purely for music. Think of any song by any artist in any era and it will be there. You can save your favourites and use it like a radio. There's also a ton of music you can download legally and freely. It used to be to discover new music you had to listen to the radio; now you can browse countless sites and see your favourites as well as hear them. And you can listen to any radio station you want.

6. Shopping

My sister has just published a book. It is fantastic and full of recipes for the sort of (mainly) British favourites that I used to enjoy as a kid. I thought I would buy several copies to give away. Problem - the list price is 20£ (it's a big glossy hardback) and the discounted price on Amazon around 13£ I think. But a quick search using Google's Shopping results section and a 7.99£ offer inlcuding delivery popped up. I bought three and they threw in a free book because of a special offer. The book is called Ramblers Rewards and the cheap bookseller TheBookPeople.

7. Blogging

Writing and reading other non-professional opinions is one of the ways the internet has made life more democratic.

8. Reviews

You never have to take a chance on anything these days, be it book, film, product, holiday destination etc. They are all exhaustively reviewed online.

9. Facebook

Say what you like about social networking but it is amazingly easy to keep in touch and make new connections using sites like Facebook.

10. Information for life

Well, of course, I couldn't go without mentioning sites like our's which provide the information you need for doing anything from paying your taxes to fixing your computer to diagnosing that funny pain you've been feeling in your big toe.

That's my list but I am sure everyone will have their own particular ways that the internet works for them.

Talking rubbish

There are a few things about living in Spain that turn me from a mild mannered accountant into the most Meldrew-ish of Grumpy Old Man in a flash. Usually the bugbears relate to breath-takingly bad customer service (e.g. see Will Spanish Business Ever Get the Internet?) or something car-related (does anybody use indicators any more?). Recently though I think it is rubbish that has wound me up the most. Specifically the laziness of people when it comes to its disposal.

It seems that Spain had no equivalent of the Keep Britain Tidy campaign that I remember from my childhood. Chucking takeaway cartons onto the street, leaving bags and cans on the beach and throwing rubbish out of the car, seem to be perfectly accepted disposal techniques.

But what really winds me up is the people who either make no attempt to recycle or leave their rubbish on the road next to, rather than in, the bins. If you have some papers or plastic bottles is it too much to ask to throw them in the right container which is right next to the green bin?

What I find especially infuriating is the people who have gathered up their recycling (say bottles) in a bag and who, because the particular rubbish stop they have parked at does not have the right container, leave it by the side of the bins. It's like they are say "look I've done my bit collecting the stuff but do you really expect me to go to any trouble finding the right container".

And what of people who leave cardboard boxes beside the blue paper bins rather than crushing them and actually putting them in the bin. Are they that busy or feeble that they can't finish the job. I DON’T BELIEVE IT!

I really must take a lie down and stop getting so worked up.

Recent articles on the Advoco website:

Contracting in Spain

How to save money on your Spanish non resident tax declaration

The downside to owning a place like this ...

Judging by the increased demand we have recently experienced for our Spanish Tax Form 210 service, holiday home owners are starting to think about their tax returns. There's plenty of time as the declarations for 2009 are not due until the end of the year. For those Spanish property owners who don't anything about their tax obligations, I have pasted in an extract from the Spanish tax office website describing what has to be declared for non residents who DON'T rent out their properties.

For those that do understand that there is income tax to pay and wish to ensure they are on the right side of the law, how can the declaration be made as cheaply as possible? Well unfortunately there is no way (that I know of at least) of reducing the tax burden itself because it is based on a fixed percentage of the property's rateable value (see details below) without allowances or deductions. However if you have or intend to get a tax adviser to make the declaration for you there could be savings to be made.

Many people who do pay the tax use a paying agent to do the paperwork but that can prove costly if you haven't shopped around for a low fee option. This may be the case if you are using the lawyer who handled the original property purchase. How much should you pay? Advoco charges 30€ (upwards) and some other services are being advertised for not much more.

Or why not do it yourself? It sounds a bit radical but it is not so hard particularly after the first year invested in getting yourself organised. There is info on our site (Spanish non resident tax) and others including the government's - see below. If you have any questions posting a question on one of the Spanish forums will usually yield an answer.

Extract from the Agencia Tributaria website explaining the non resident tax charge:

The amount to declare will be that resulting from applying the following percentages to the assessed value of the property as shown on the Property Tax bill (IBI):

· In general, 2%.

· In the case of properties where the assessed value has been revised or modified since 1 January 1994, the percentage will be 1.1%.

This yield is calculated once per year, on 31 December.

If you have not been the owner of the property during the whole year, or if it has been rented for any period, only the proportional part of this amount is declared.

· Tax Return Form: 210, using the general section 210-A and entering 02 as income type.

· When to file the tax return: During the whole natural year after the date of accrual.

· Where to file the return: With the Branch of the Tax Agency or Administration belonging to the Tax Agency responsible for the area where the property is located.

· Tax rate: 24%.

Telefonica to call time on "All You Can Eat" internet access

It seems like the telephone companies are starting to regret the way that internet access has always been charged. Since dial-up faded away and broadband came in, it has been charged at a flat rate by the Internet Service Providers regardless of how long the user is online or, more importantly, how much data they download; the "all you can eat" buffet model.

It does seem kind of ridiculous now that heavy users, streaming movies and downloading music and games 24/7, pay the same as the occasional user who is just sending a few emails. Particularly given that the latter may be adversely affected by the former i.e. light users subsidize heavy users but everyone suffers equally when the network runs slow at peak hours. From my experience this is early evenings with my Telefonica connection when I imagine a lot of kids are downloading stuff after school and people are illegally putting movies in their memory sticks for the night's viewing.

Telefonica's CEO Julio Linares has called the current situation "unsustainable" quoting figures that 5% of mobile internet users produce 75% of the traffic -

Telefonica wants to charge more to customers who connect more

It will be difficult to change the status quo however sensible some kind of metered charging appears to be in theory. People have got used to paying a flat rate and will not take kindly to feeling like they have to watch every minute they are online or, more likely, pay for every Byte they download.

It might be OK if the majority of light users got a big benefit from the new regime i.e. monthly bills halved (Telefonica's ADSL charges are very high when compared to the UK) but I suspect they won't. If they can get away with it the ISPs will be looking to increase overall revenues and only they will benefit (both from lower usage of their networks and increased charges from heavy users while light users pay about the same). We'll see but enjoy the free, all you can eat option while you can.

From our website: time to do your non resident Spanish taxes?