Every year, over 8.7 billion euros are generated within the black economy of the Canary Islands—money that comes from legal activities involving tax or labour fraud. This amount places the Canary Islands, alongside Andalusia, at the forefront of Spain’s autonomous communities in terms of black money generation, representing 17.9% of the archipelago’s Gross Domestic Product (GDP), which stood at around 48 billion euros in 2022. These figures exceed Spain’s national average of 15.8% by more than two percentage points.
In essence, for every 100 euros generated in the Canary Islands economy, 18 euros escape tax and labour regulations, creating a significant drain on public funds and offering unfair competition to businesses and individuals who adhere to their legal obligations. Common examples of such fraudulent activities include jobs that go unreported, part-time positions that function as full-time, payment of wages off the books, and employees who are not registered with Social Security. These practices are particularly widespread in industries like hospitality, domestic work, agriculture, and private services.
The report, commissioned by the Economic and Social Council of the Canary Islands, highlights that measuring the extent of the underground economy is inherently challenging due to the secretive nature of such activities. The report provides an analysis of the underground economy’s evolution between 2004 and 2022, during which the Canary Islands consistently ranked in the top three regions for black money generation. In fact, the Canary Islands topped the list in 2010, 2020, and 2022, with the highest rate recorded in 2004 when the shadow economy peaked at 23% of GDP.
Regions frequently accompanying the Canary Islands in this ranking include Extremadura and Andalusia, forming a trio of areas with the highest levels of poverty. In these regions, at least 30% of the population is at risk of poverty or social exclusion, suggesting a strong correlation between economic hardship and the underground economy.
While the Canary Islands’ black economy figures are considerable, they are not among the highest in the European Union. Countries like Bulgaria, with its shadow economy representing 33% of GDP, along with Croatia and Romania, show that tax evasion and labour fraud are global issues. In contrast, nations like Austria, Germany, and Denmark have rates below 10%.
In an effort to combat the underground economy, the Canary Islands’ Minister of Finance, Matilde Asián, recently announced plans to bolster human and technological resources. She emphasized that the black market represents “unfair competition” for businesses and the self-employed and poses a threat to the region’s overall economic stability.
