What is black money? Well it is money paid in cash which is not declared to the government. It is not legal and never has been but it was common place in Spain up until a few years ago and even today the practise still goes on but in mutchly reduced amounts. It was seen as a way to avoid paying tax on buying property. The price of a house is taxable on the declared value – the amount shown on paper but if you get some of the price of the house paid to you in black money then you pay a reduced sum of tax.
I have heard horror stories of people sitting in official offices with someone keeping watch at the door while large brown envelopes of money were counted and exchanged, like some clandestine exchange of government secrets by two characters from a cheap spy thriller. They don´t have unmarked drops in secluded woods or write messages in invisible ink but it is pretty cloak and dagger and certainly not something to be discussed at a polite gathering.
Black money is not an invention of the Spanish and hard cash is common currency in countries which have experienced civil unrest or civil war in living memory. People like to have a bit of cash on hand “just in case”. If you need to pack up and move in a hurry then cash is good. You are not going to end up with your life savings stuck in a bank where you cannot access it, just as you need to leave the country. Likewise, some cash can smooth your journey as you flee an area or country. Crossing palms with silver could mean the difference between survival and death. When the crisis is over the desire to be in control of your money stays and people prefer to have a mattress full of bank notes than a cheque book or credit card.
A distrust of government and a dislike of banks also plays a part. The Spanish do not like the thought that your money is somewhere that the government can keep their eyes on it or in the hands of some organisation who might do something silly with your hard earned shekels. Perhaps we in the UK should have been more cautious about giving the banks free reign with our wealth!!
The downside to black money is that you can never use it legitimately. You cannot buy investments with it as the government will wonder where you got this sudden wealth from and you cannot use it to pay the mortgage of domestic bills if times get tough. I once asked a bank manager friend what you could do with this dodgy currency and he said buy a car, buy a boat or go a holiday. Fine if you fancy any of those options but tough if you are suddenly made redundant and need to draw on your savings to get by.
The problem with black money is being the last in the chain. The practise is dying out and will one day gasp its final breath and then anyone who paid black money when buying property will be stuck with the big bill because they will have to declare the full value of the property on the paperwork and pay up accordingly, so think carefully before you get involved with the practise. It is not legal and you may end up being the Patsy.