Spain's Tax Agency Proposes Tracking All Card Payments

Spain's Tax Agency Proposes Tracking All Card Payments

The Ministry of Finance has informed the European Commission of its intention to require banks, payment institutions, and e-money platforms to provide massive data on all card, wallet, and mobile transactions, regardless of amount. This measure, included in the evaluation report of the 2021 anti-fraud law, would expand current reporting obligations, which are limited to operations over €3,000 and credit/debit cards. The stated goal is to uncover low-value non-compliance, but the financial sector warns of potential operational issues and the need for additional technological investments.

What exactly does Hacienda plan regarding card payments?

The plan involves modifying the regulation governing tax procedures to broaden financial entities' reporting duties. Currently, the rule requires reporting on open accounts, balances exceeding €6,000, credit operations, and card movements above €3,000. The intention is to eliminate this threshold and cover all operations, including prepaid cards, digital wallets, and any other payment method. Furthermore, the obligation would extend to authorized e-money issuers (16 as of end-2022) and payment institutions (around 300).

This measure represents a tightening of the Agencia Tributaria's strategy, which already accesses many transaction details via POS terminals but has less precise control over wallet top-ups and prepaid card operations. Industry sources emphasize their willingness to provide the information, although they warn that the massive volume of data could require extra technology investments.

Why does Hacienda want to monitor every single payment?

The Ministry justifies the measure by the need to reduce tax evasion. In the report sent to Brussels, it includes a chapter with technical proposals that, in its opinion, "can contribute to reducing tax fraud by improving the fight against it." The idea is to increase information flows entering its databases in three directions: access to all card operations, expansion of card types covered, and extension of the obligation to more entities.

However, there are doubts about the potential operational problems caused by transmitting such a massive flow of information. Access to such a high volume of low-value transaction data opens the door for Hacienda to tighten its grip on everyday operations that are normally not subject to taxation. Tax advisors warn that low-value non-compliances will be uncovered.

The debate on privacy and movement monitoring

The proposal has sparked intense debate regarding privacy and financial movement control. Some sectors argue the measure is another step toward total payment surveillance, similar to China's social credit system. Others contend that Hacienda can already access this information through requests to entities, so the change would only miccionan automatic and easier access.

Presumption of innocence also comes into play. Some point out that Hacienda may accuse you of a crime, and you must prove your innocence, not them your guilt. On the opposite side, it is recalled that most EU countries have cash payment limits and that automatic information exchange already affects individuals.

Alternatives to avoid payment tracking

Facing this scenario, some taxpayers are already seeking alternatives to avoid having their payments tracked. One of the most mentioned is using cryptocurrencies and cards linked to exchanges without KYC, allowing users to spend gains without leaving a direct trace in the traditional banking system. Cases are known of people who have used this method for years for daily expenses like gas stations or supermarkets, without Hacienda knocking on their door.

Another option is opening foreign accounts and transferring income directly there. The effect is double: no cents go to Spanish banks, and those banks do not care if Spanish Hacienda asks for all that data. However, this strategy is not risk-free, as automatic information exchange between EU countries is becoming increasingly broad.

Impact on the shadow economy and freelancers

According to some analyses, the shadow economy is a consequence of high taxes. On one hand, they don't want a shadow economy, but on the other, they impose very high taxes on freelancers. The remaining fraud is undetectable: the plumber paid in cash, the private tutor, and little else. Anyone paid electronically doesn't consider doing under-the-table work because they get caught for sure.

Bar Paco operates under the 'módulos' regime (flat-rate tax scheme) and pays the same whether it sells or not. They aren't pursuing tax fraud; they are pursuing your data, wanting to know everything about you. The measure might deter the shadow economy but could also push more people to seek alternative payment methods outside the system.

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Hacienda's plan to track all card, mobile, and wallet payments is still at the proposal stage. There is no concrete regulatory initiative yet, and the report sent to Brussels is just a preliminary step. We will have to see if it eventually materializes and how it affects taxpayers. Meanwhile, the debate on privacy and financial movement control remains open.