Archive for octubre, 2011
– http://www.iedm.org/files/cdr_nov07_en.pdf
– http://www.wisegeek.com/what-is-the-underground-economy.htm
– http://diydollars.com/diy-life/the-underground-economy/
– http://www.iedm.org/files/cdr_nov07_en.pdf
– http://www.entrepreneursolo.com/entrepreneurs-in-spain/the-growth-of-the-black-economy-in-spain
At the time, the underground economy is widely perceived as growing, fuelled in part by a weak economy, growing federal deficits, high unemployment rates…
The most realistic estimates suggested the underground economy in Spain accounts for between 16% and 20% of GDP and that irregular activities are increasing by crisis. These figures serve to realize of bad situation of Spain. Although the government Work inspections to combat the underground economy accounts for 40%, these are mostly in conjunction with risk prevention (20%) or employment regulation (15 %), the underground economy continues to increasing .
According to the article by sector, «the figures show a total of 49,903 inspections in hotels, it is followed by commercial businesses (44,937), construction (43,635), service industry (38,045) and agriculture (9,248).
From these inspections, fines to Social Security totalled 960.7 million euros, representing 12.4% more than in 2008. In addition, 48,762 people began to pay into Social Security as a result of these actions, of which 23,924 were voluntary (+10.52% on 2008) and 24,838 demanded (+14.43%). It is reported that 29,357 violations were for lack of any social security payments, 7,122 workers had no work permit and another 8148 which were also claiming unemployment benefit, plus 682 of the detected irregularities were linked to other claimed benefits.
One of the Government’s goals in increasing fraud inspections was to transform 30,000 illegal workers into permanent temporary staff, the final figure turned out to be much higher at 52,000.»
Link of the article: http://live.kyero.com/2010/01/13/20-of-spains-gdp-in-underground-economy/
Despite all the inspections the economy continues in force and this is partly a problem of government.
The government should be tougher on this issue and should set higher standards.
In these times of crisis it is difficult to wipe out the entire country’s underground economy, but at least it may decrease.
I think when we improve the current economic crisis, underground economy activities will be reduced but never completely finish because people like to earn money, and even more when wages are not very good.
Since the “discovery” of the informal economy in the beginning of the seventies, many observers subscribed to the notion that the informal economy was marginal and peripheral and not linked to the formal sector or to modern capitalist development. Some continued to believe that the informal economy in developing countries would disappear once these countries achieved sufficient levels of economic growth and modern industrial development.
The informal economy can however no longer be considered as a temporary phenomenon. Furthermore, the informal economy has been observed to have more of a fixed character in countries where incomes and assets are not equitably distributed. It seems that if economic growth is not accompanied by improvements in employment levels and income distribution, the informal economy does not shrink. The situation is therefore that the informal economy is continuously increasing in most developing countries, even in rural areas. But I will focus in Spain.
CAUSES
The underground economy is widespread in time and in space. Some causes that have led to the underground economy are:
– History presents us with a large number of prohibition and taxation events that gave rise to contraband in many products: perfumes; coffee; salt; matches…among numerous other examples. At different times and places, pamphlets, newspapers and books were censured. This fostered a black market has grown over the years.
– An answer to the question of causes can be found in Adam Smith’s celebrated Wealth of Nations. Smith saw the foundation of modern society in the division of labour, which itself came from “a certain propensity in human nature… to truck, barter, and exchange one thing for another”. Exchange is a fundamental dimension of human relations, and occupies a central place in economic theory. Every time the propensity to exchange is constrained, individuals try to circumvent the constraints in order to obtain what they perceive as the benefits of exchange. In other words, when impediments prevent exchanges in the official economy, demanders and suppliers will often retreat in the underground economy to pursue their trades.
– The unemployment is one of the more important causes of the underground economy. When the people are unemployed they don’t earn money to feed his family and need to earn money as they can.
Here we have a link where we can find an article about unemployment and underground economy in Spain: http://www.telegraph.co.uk/finance/breakingviewscom/6378327/Recession-hit-Spain-goes-back-to-black-economy.html
– Other cause is the reduction of working hours on a mandatory basis. This causes people to earn less money and need other jobs to survive. They can only have a second job in the underground economy because it is illegal.
– These are some causes about underground economy, but it is likely that the sole motivation is by working poor trying to keep up with the rising cost of living in an economy where prices of everything keep climbing while wages remain stagnant. In the end, media reports of government bureaucracy and legislation acting in collusion with the growing power of unbridled corporate greed fuel most of the economic angst of taxpayers. Many workers, quite justifiably so, become indignant when they see legislators creating massive loopholes for big corporations while tightening the legislative noose around the necks of both the middle class and working poor.
There are also many strong arguments made by those participating in the so-called “underground economy“. Some could argue that the types of jobs in an underground economy almost always stay in the local communities, thus strengthening them, while cutting out the middleman – the government. Another argument is that there is, in consequential terms, little difference between an underground economy and the lack of transparency you find in the government and corporate accounting practices.
CONSEQUENCES
But on the other hand the underground economy has a lot of consequences; many of them are bad consequences.
– The most obvious being undermining of the government’s ability to generate tax revenues or collect social security contributions, while others include an imprecise accounting of the economy’s resources (e.g., the number of qualified doctors when some practitioners are not registered or are operating without a license) creating planning and resource allocation challenges for governments. There are also serious personal consequences for actors of the underground economy such as unregistered workers who get deprived of the benefits of social insurance schemes, including pension and health benefits.
Whereas the prevalence of the shadow economy has been recognized both by academics and policymakers, formal investigations of its effects are relatively recent, and many issues remain unresolved and underexplored. A key underlying issue is the inability to adequately measure the extent of the shadow economy. It is impossible to know exactly the quantity of money there are in the underground economy, because the operations that it is do in this economy aren’t registered and the government only can operate by approximations.
The underground economy is present in the day to day and it is increasing more and more. As businesses in Spain have such heavy upfront costs many sole traders will start in the Black economy. Their first months will be cash in hand until they are earning enough for two things.
1) To be able to pay the costs involved in being an autonomo whilst still taking money home at the end of the month after paying their taxes too
2) To be able to understand how to bill in Spain when virtually everyone asks whether they can get away without paying VAT.
Plumbers, electricians, teachers, short courses etc… virtually anything that can be done in a one on one transaction will involve that inevitable question. Is it possible to reduce the bill? This usually means can I pay without VAT?
For the Spanish economy the effect is twofold. Firstly you should never believe official government figures about the economy in terms of size or numbers of employed or unemployed. One of the main effects of the crisis in Spain is that the unemployment figures have been rising hugely. One of the main areas that are rising is in those who were self employed. Now there is no doubt that people are losing jobs as they cannot earn enough to make their work pay for them but there is no real incentive to declare yourself unemployed here as unemployment pay for previously self employed workers was nil until the government put in an emergency 420 Euros per month payment in place last year.
Therefore it is clear that people are signing off the self employed register and signing onto the unemployed register but they are continuing to do the work they did previously. However the government now doesn’t get their social security payment and VAT is not been collected either meaning that central government income goes down.
An example of underground economy in Spain is for example the case of a small town in Andalucia where everyone is officially unemployed now apparently yet spending in the local
area has remained constant from 2008 to now. Ie money is still there but it is just not as visible as it used to be.
The knock on effects of this lack of state income are huge as they cannot afford to pay for social programs that might benefit from greater levels of support and recently the government has been forced to suspend the support of 420 Euros for a year to newly unemployed people.
But the Spanish are not only who engaged in the underground economy, but also immigrants who come to Spain. More than half the immigrants in Spain work in the underground economy.
Domestic service, construction and agriculture are the sectors hardest hit by this phenomenon. The crisis is felt in the activity of the Information Centre for Foreign Workers (CITE) CCOO, whose users have dropped 20% from 23,612 in 2005 to 18,571 in 2009, a year in which the 54.4% of the group said they were employed ‘informally’ compared to 27.39% in 2006.
The statistics of CITE 2009, reflects that in the last year, immigrants who worked in the underground economy increased from 53, 43% to 54% and that this employment situation affected both those who have an ‘irregular administrative situation’ as those who have residence permits and work permits.
Domestic services, construction and agriculture are the sectors hardest hit by this phenomenon, so the CITE has called for greater inspection work against what it sees as fraud.
In 2009, this agency attended 1888 fewer than in 2008, a reduction that union sources attributed to the closure of offices of Reus (Spain) and Sant Feliu de Llobregat (Barcelona).
The study also reflected
a decline of users who were in an irregular administrative situation, which fell from 45.3% to 43%. The report’s claim that if an extrapolation of the data, and taking into account foreign persons registered in Catalonia (1.150 million) and residence permits (950,000) could be estimated that there are 200,000 ‘irregular immigrants’.
The increase in unemployment mainly affected the Moroccan community; however Bolivians, who have more administrative irregularities, are concerned less with unemployment, which shows the weight of the underground economy among workers from this source.
Here we see the financial activities that are more tax fraud, that is, which is performed more underground economy. (Source: havocscope. http://www.havocscope.com/products/ranking/ )
- Illegal Gambling $250.1 Billion
- Counterfeit Drugs $200 Billion
- Prostitution $187.67 Billion
- Marijuana $141.80 Billion
- Counterfeit Electronics $100 Billion
- Cocaine $85 Billion
- Prescription Drugs $72.5 Billion
- Heroin $68 Billion
- Software Piracy $58.8 Billion
- Gas and Oil Smuggling $53.64 Billion
- Cigarette Smuggling $50 Billion
- Counterfeit Foods $49 Billion
- Counterfeit Auto Parts $45 Billion
- Counterfeit Toys $34 Billion
- Wildlife Smuggling $32 Billion
- Human Trafficking $32 Billion
- Amphetamines $28.25 Billion
- Movie Piracy $25 Billion
- Illegal Fishing $23.5 Billion
- Human Smuggling $20 Billion
- Ecstasy $16.07 Billion
- Illegal Logging $15 Billion
- Music Piracy $12.5 Billion
These are illegal activities and the most important is illegal gambling, as we can see in the ranking. In this activity the tax fraud is $250.1 billion, a lot of money. The next activity is counterfeit drugs with also a big quantity of money. More activities are prostitution, commercialization of marijuana, counterfeit electronics…
Some people would rather operate a “legit” business but also make some “underground money”. Some of these other methods of cash income involve “side income” within a legitimate, registered business. Some prime businesses for doing this would include restaurants and bars (classic examples of businesses infused with a great deal of hard-to-track cash transactions) as well as peripheral cash-only businesses such as Laundromats, self-serve car washes, and vending machine routes. These all require some sort of initial investment – including a lease. But if one has a business such as these, there’s a lot of wiggle room in what is reported. A lot of room to stay in the underground economy.
But for people with little or no assets to begin with, there are still many options.
On the one hand, these are some activities that people can do to earn extra money, but however it must be stated again that working and intentionally not declaring income is, in most cases, a federal offense.
-Earn cash tutoring college students. One of the easiest ways for a college or university grad to earn straight cash is to work as a tutor. Some skills that are in very high demand for this could involve tutoring math courses, physics, English literature, history, or languages such as French or Spanish. You could also offer to teach English to new immigrants off the books.
-Make a second income delivering lifestyle services to people’s homes. There are women who made ends meet by offering professional salon quality hairstyling – in people homes, well below market cost of the typical salon price. The same applies to similar work: manicures, pedicures, massage therapy, aromatherapy, yoga classes, reflexology, reiki, alternative medicine/naturopathy, the list goes on.
-Work for extra money in the food and beverage industry. Without a doubt, one of the biggest underground employers is the food industry. Coffee shops, bars, pubs, taverns, restaurants etc
-Offer traditional building trades in your community. This “no-brainer”, like the food and beverage is one of the two most obvious examples of an underground employer. Offering anything from complete major renovations to small carpentry jobs, welding jobs and plumbing repairs. If one is a skilled carpenter with their own facilities, one could even build custom lawn furniture, wooden retro screen doors, stairs – right down to something obscure like custom birdhouses, some of which can fetch over a hundred dollars. The construction industry is a huge consumer of undocumented workers.
-Earn profit from your craft skills. Selling anything from homemade soap and paper products, to quilting, sewing, ceramics, pottery, jewelry, screen printed clothing, homemade rugs.
-Teach music lessons
-Rent your home or apartment to tourists. Just check Craigslist and I’ll bet that there are people in your city advertising to rent out their apartments for close to what hotels charge! All you need to be competitive is a place that has a good location for tourists and is of the quality that someone would actually like to rent, and you could be on your way to having a competitive bed and breakfast business.
-Offer computer repairs. This could be another perfect way to provide a service for people off of the books.
But in the other hand, these are some measures to avoid the underground economy. Spain has created a plan with some measures. We can see in this article:
“Spain unveiled a crackdown on underground employment as the government seeks to shrink one of the region’s largest shadow economies bolster tax revenue and reduce the Europe Union’s highest jobless rate.
The plan increases fines for companies hiring workers without registering them with authorities and for people working at the same time as claiming jobless benefits, Labor Minister Valeriano Gomez said. The new fines come into effect on Aug. 1, and current sanctions remain in place until then, he told reporters after a weekly Cabinet meeting in Madrid today.
Spain’s Socialist government is clamping down on the underground economy, which is worth almost a quarter of gross domestic product, according to Spain’s union of tax inspectors. Amid efforts to shield the economy from the sovereign-debt crisis, the government is trying to raise revenue to slash the euro region’s third-largest budget deficit while cutting an official unemployment rate of 21 percent.
“We’re at the top of the European rankings in terms of the black economy, just behind Greece and neck-in-neck with Italy,” Jose Maria Mollinedo, secretary general of tax inspectors union Gestha, said in a telephone interview.
Gestha estimates undeclared earnings amount to 82 billion euros ($121 billion) a year and shrinking the shadow economy by 10 percentage points as a proportion of GDP would raise 13 billion euros in social-security contributions.
500-Euro Bills
Overall, the underground economy is worth 23 percent of GDP, according to Gestha. Funcas, the research arm of Spain’s savings-bank association, puts the number at about 17 percent and says there may be around 4 million undeclared jobs. Friedrich Schneider, a professor at the University of Linz in Austria, who studies underground activity, estimates Spain’s shadow economy at 19 percent of GDP last year, compared with 25 percent in Greece and 22 percent in Italy.
Spain is home to 18 percent of the euro region’s 500-euro bills, which are habitually used for unrecorded cash transactions, although the Spanish economy accounts for 12 percent of the region’s output, according to data from the Bank of Spain and European Central Bank.
Official Unemployment
The plan increases by five-fold the minimum fine for companies hiring workers without registering them with the social security system to 3,126 euros, and raises the maximum fine to 10,000 euros, the ministry said. It almost doubles the minimum fine for people claiming benefits while working illegally to 10,000 euros, lifting the maximum sanction to 187,515 euros. Inspections will be stepped up as part of the program, the ministry said.
Today’s measures aim to trim the official unemployment rate, which rose to 21.3 percent in the first quarter, the National Statistics Institute said today, compared with 20.3 percent in the previous three months. Even though joblessness in Spain tops the EU, the default rate on home mortgages is 2.5 percent, suggesting that households are topping up unemployment benefits with informal income, Mollinedo said.
“The underground economy is a survival system both for workers and companies,” said Jose Manuel Saiz, a professor at Nebrija business school and contributing author of “Ethics and Legality in Business,” which address the underground economy.
Informal jobs will only be converted into formal employment “if the company can pay,” Saiz said, warning that the program may “strangle small companies that are just surviving.”
Role of Companies
The plan may also not go far enough as it only tackles one aspect of the underground economy and doesn’t address the source of the unregistered cash that companies use to pay informal workers, said Javier Diaz-Gimenez, a professor at IESE business school in Madrid and former government adviser.
Employers paying a salary of 2,000 euros a month must additionally contribute more than 500 euros in social-security payments, data from the national statistics institute show.
“If you’re serious about the underground economy you need a big plan that doesn’t just include the labor market, but a comprehensive approach to the black market,” he said in a telephone interview. “The whole thing is patchy, half-baked.”
The government has also been cracking down on tax fraud since 2005, tracking payments made with 500-euro notes, tightening control on bank transactions and investigating fraudulent ownership structures in companies. The campaign against tax fraud raised 10 billion euros last year, or 1 percent of GDP last year, the Finance Ministry said on Feb. 10.”
Link of this article: http://www.businessweek.com/news/2011-04-29/spain-to-pass-black-economy-plan-to-help-budget-employment.html
· What is the underground economy?
The underground economy, which I will also refer to as the “illegal economy” (or “underground markets” or “illegal markets”), is that part of the economy where goods and services are produced, exchanged or consumed illegally. These activities are illegal either because the production or consumption of the goods or services is forbidden by law (recreational drugs or some prostitution services, for example) or because legal goods or services are exchanged under illegal conditions (construction services by unlicensed workers, smuggled goods or illegally-sold goods that would otherwise be legal).
This “shadow” economy is more streamlined and more profitable to the participants while less profitable to the government. And this is has undoubtedly become more commonplace in these hard economic times.
The simple fact of the matter is that while people have less money, they will look for other means to gain income, and those methods of income-generation will often be unconventional and will be done “on the side”. These methods will include barter and trade in addition to cash-payment income.
When government agencies calculate economic figures such as the Gross National Product (GNP), they rely on information gathered from legitimate income reports generated by companies, non-profit organizations and individual taxpayers. What these agencies cannot use in their economic forecasts, however, are the estimated billions of dollars in cash circulating through what is known as the «underground economy.» This kind of economy has been in existence as long as its legitimate counterpart. The difference is that the government has any number of methods for tracking the exchange of goods, services and currency in an above-board economy, but very few ways of tracking the activities of an underground economy. Prostitutes, gamblers and others earning illicit incomes are not likely to provide the government with accurate income information on their IRS tax forms, for instance. A cash-based underground economy works best without governmental interference.
The underground economy supports any number of overseas operations, including covert wars, raw drug production and human slavery rings. All of these illegal activities require an abundant amount of untraceable cash, preferably from a strong government with a stable legitimate economy.
This is not to suggest that every aspect of the underground economy revolves around criminal activity, however. There are also a number of legitimate occupations which largely work on a cash basis, and not all of that income is necessarily reported to the government. Many states have laws requiring residents to pay sales taxes on products bought online, but few have the means to enforce them. Trade and bartering, whether in online auction websites or through classified ads, is also a form of underground economy. Transactions are almost always conducted in cash, and the exchanges are rarely reported as income.
Wikipedia is a free and polyglot enciclopedy, created by Wikimedia Foundation. It has more than 17 millions of articles in almost 300 languages. They have been written by volunteers around the world. And almost anyone can edit them.
This is a definition of Wikipedia that we can find in Internet. Despite having a lot of information, it has detractors and people who support it.
On the one hand, we find some reasons that the detractors say. For instance, Wikipedia is a free enciclopedy and their information can be modified by people who aren’t part of this project. This can causes the information not to be totally reliable and quite often we don’t know the sources of the information.
On the other hand, we also find a lot of people who defend the Wikipedia, because despite of what we said above, this enciclopedy is the most important at this moment. According to some studies, Wikipedia has more quality than British Enciclopedy, which is one of the most important in the world. Also, it contains articles about varied topics and it has information that can be printed.
In conclusion, we can say that although Wikipedia gets good and bad critics, it is one of the most used in the world. As the article says «the site is now used every month by upwards of 400 million people worldwide». It causes that although we do not know exactly the source of the information, we think that it is a secure and reliable information and we continue to use it for information.
Every day there are a lot of heart programs and magazines that they deal of problems with famous people. But often the articles and pictures that appear in these magazines are violating the privacy of the people, and it is illegal. However the people continue to buying these magazines and to watching these programs and they don’t consider they are violating the privacy of these individuals.
But it is very different when this news doesn’t talk about celebrities, and they talk about people who have been associated with violence. It seems us very well that journalists take personal pictures or news of celebrities, but we disagree with these pictures and news pertaining to victims of terrorism, for instance. We consider that they are violating the privacy of the other, only because they aren’t famous people.
In my opinion I think both famous and victims of terrorism or persons who have suffered some misfortune have the right to privacy. Journalists shouldn’t violate their privacy only because people want to know the live of these persons. The big problem of continue to doing these programs and heart magazines is the interest that people show by them. If these persons don’t see them, the journalists must make reports about others interesting things.
A presentation is the practice of showing and explaining the content of a topic to an audience or learner.
To make a good presentation is necessary to separate the information in three parts:
The first part is the beginning; it is the moment the speaker must do his own presentation. He must present the topic of the presentation, doing a summary. For this, it is a good idea to use some words that can help him, for example: firstly, the second part, finally…Those words make that you understand better the information, because you can structure the different points.
The speaker has to say the reason of the presentation and the purposes that he wants to get with it.
Normally also he will give the audience a chance to ask questions if they wish at the end of the presentation.
The second part is the body; in this section the speaker must expand the summary he had done in the first part. He can use different objects to make more entertaining the presentation, for instance: bar graphs with colors, illustrations related with the topic, slides in the power point, videos…
It is very important to draw the attention of listeners, and it is difficult because the people get bored easily. The speaker can use methods to avoid this, to make rhetorical questions, to change the volume of his voice or to do voluntary questions that they can be answered by the audience.
Finally, at the end of the presentation the speaker could give time to audience for to make the questions that they have. And he will answer the doubts.
In conclusion, I think that a presentation must be well organized for the people understand all content. The most important is that the audience can’t bore because they won’t listen you. The information must be clear; it mustn’t difficult, unless the listeners are specialist in the topic. Also it must be brief and the presentation should not last long, the speaker will make a summary with the information and he will say the most important information.
At the time of creating a work appear copyright of the person who has written this work. These rights protect the creator of artistic or literary work to possible falsification, to establishing an economics and moral rights. They allow the author receives financial compensation if his work is counterfeit and he can control the publication and the reproduction of his creations. Also, the owner of the copyright can lend to other the copyright with a written agreement and they can use his works.
On the one hand the copyright protects a lot of works, for example, books, magazines, films, songs…but it doesn’t protect ideas, news, facts…
It is valid in a work until the death of the creator of this work and fifty years more after his death. When copyright finishes the work enters in the public domain and it may be freely copied, respecting the moral rights.
On the other hand exist fair dealing which it refer to the possibility to copy works for research, studies, opinion…without have a permission of the owner of the copyright.
When the people do these performances they must say the author of each copied or used work.
In my opinion copyright is necessary because if they wouldn’t exist some persons could use works that they aren’t own. The counterfeiters can win a lot of money with to using works these works. Everyone should use the own things, but if we use works that they aren’t own we have to say the owner of the work.
Nowadays it is very difficult to buy, by the increase in prices, the commodities like food, clothing, etc…and products of secondary need.
As we know, some countries are more developed than others and these countries have a greater variety of products at your fingertips and a greater amount of money to buy them. In contrast, developing countries have great difficulties to meet their basic needs.
The more developed countries are talking decisions on the increase or decrease in prices of products. The prices of some products have been increased by the GSCI (Glodman Sachs Commodity Index), an index that reflects perfectly the evolution of raw materials worldwide. They have realized that raw materials have significant value and that they can get large amounts of money selling them. This has made that many people suffer from hunger and can not dispose of commodities for a living.
This should be totally different, because goods, such as cereals or natural gas, are much needed at present and we can not allow that they have a high prices, because if they keep increasing there will come a time when no one can dispose of them and the problems will be important. So companies that own these products should be more humble and know that not everyone has enough money to buy these foods and without them life can be complicated. The owners of these companies should not be so greedy and should not think only of money, someday they may be in a situation of poverty, and will be they who have to fend for themselves to survive.
THE DESTRUCTIVE POWER OF THE FINANCIAL MARKETS
Over the years, we are moving in all the aspects, but above all in the economic aspect. We have gone from an economy that was only by subsistence and consumption, in the old time based on barter, to a monetary economy, that sets the products prices and is regulated bt the demand and supply.
The changes, usually, are to improve something. The development of the economy and the markets has allowed a good evolution of the society, however, have emerged a lot of conflicts because of money. There were a lot of economic crisis all along the history that didn’t have good consequences.
A lot of these problems, as the current crisis, for example, is because investors are greedy. They do all they can to get more and more money. And as the saying tells «greed breaks the sack». On the one hand, the banks gave loans easily to people who couldn’t return the money and on the other hand, politicians had accumulated to much debt.
As a result of that crisis certain companies have grown, leaving others as weak competitors, so investors prefer to invest in bigger companies because they are much more safer. So many companies should leave the market because they haven’t make any profit yet.
For instance, John Paulson, one of the best speculators, will invest in assets and profits are rising even more.
Also Deutsche Bank, a bigger hedge fund use to its knowledge of demand to desing complex hedging strategies and therefore profitable for its customers.
Where ever you look, everyone try to get the best profitability of something, even if they have so go thought unethical things, like rising prices and by consequence cause hunger.