Dateline: Barcelona, Spain
I’ll always remember my high school Spanish teacher selling our class on taking the summer immersion trip to Barcelona.
Our young, hip teacher stood at the head of the class and announced: “Girls, you may think the idea of guys with greasy hair wearing tight pants is unattractive, but you’ll learn to love it when you realize they have cute butts”.
And so another edition of “Americans stereotype a foreign land incorrectly” began.
Of course, Barcelona is a hot tourist destination not only for US persons young and old but for people from all over Europe.
One recent study showed Barcelona as the most desirable tourist destination on earth. Young girls coo over strolling down La Rambla eating tapas, or taking in the sun while watching the pigeons of Plaza Catalonia.
Indeed, Barcelona is such an enchanting city that I’ve been thinking of potential opportunities for our private club Members to partake in and be able to spend some time here.
If you didn’t know it, Spain has become a hub for entrepreneurship. Plenty of digital nomads and online businesses alike are setting up shop right here in Barcelona.
However, I couldn’t help ask myself why as I passed several shops in the heart of the tourist district today.
As I walked by clothing stores like Zara, C&A, Pull and Bear, Bershka, and others, I started thinking about just what is involved with doing business in Spain. And I very quickly got depressed thinking about doing business in Spain.
Consider that I’ve long labeled California, USA as the world’s worst place to do business. The place is a total disaster when it comes to taxes, regulations, and everything else.
It’s a wonder any business sets up shop there, and if Google and the free-flowing venture money left the Bay Area, few businesses outside of surf shacks would.
Even a few retail chains have eliminated or scaled back their presence in the state because regulations on everything from cooking oil to plastic bags make it a real pain to do business there.
Things aren’t much different here in Spain. Doing business here is such a challenge that it’s easily detected in the unemployment rate, which even at a one-year low stands at 24%.
Yes; nearly seven years after the deepest part of Europe’s financial crisis, one in four people here are out of a job. It’s even worse for youth; so bad that many are following the Irish model of exporting people.
Even Wikipedia calls the unemployment rate here a disaster. There’s a reason for that: the Spanish government has done everything in its power to make setting up a business next to impossible.
So as I walked through Barcelona today, I got to thinking. Here are a bunch of low-cost retailers selling cheap clothing to young kids that have a relatively even chance of having a job or not.
Take the clientele of a store like Pull and Bear that caters to youth with cheap, trendy clothing and chances are you could flip a coin to decide if any particular customer there is employed.
Because the economic outlook here is so depressing, companies can’t raise prices on the goods they sell. Not only is there plenty of competition in industries like retail, but there is no real demand.
If you’re broke, how do you buy anything?
The government in Spain, as with all of the European Union, requires retailers to include VAT in the purchase price. It’s not like a sales tax that you can add on top. That means when you see a sweater for $15, the retailer is only collecting $12.
For all of $12, they have to manufacture that sweater in a low-cost country, ship it to Europe, pay whatever duty applies to ready-to-wear textiles, rent a store, hire workers, market the store, license a Taylor Swift song to play in the background, and wait for a bunch of broke customers to come in and hopefully buy it.
The Spanish government makes nearly all of those things either impossible or expensive or both.
One lawyer told me that getting stuff in or out of the country is extremely inefficient, whether it’s you sending a package to family or friends, or a retailer sending dutiable goods to market. Bureaucracy rules the roost here.
Next, hiring workers in Spain is a disaster. Once you do, good luck getting rid of them if they don’t work out. With a government-created unemployment crisis, do you think the politicians will make it any easier?
Of course, the government is all too eager to teach people to be unaccountable, because that’s what will keep them reliant on the government.
For those employees you do hire, you’ll enjoy paying 30% social taxes on every euro you pay them so that they can retire in their fifties and collect a government check.
Thanks to all sorts of regulations and Town Hall busybodying, renting a storefront here is expensive. The one thing the city has going for it is tourism – largely from broke kids from other countries – and that influx of people drives up rents.
And since the irresponsible politicians here spend money like water, you’ll also need to pay nearly 50% taxes on your profits, as well as up to 47% in personal income taxes on your salary.
After all of that, you’ll be branded as a thieving criminal in the 1% who needs to pay more to solve the country’s problems.
There are other businesses that could be equally bad businesses to run. The inherent problem with doing business in a sinking economy like Spain is the simultaneously never-ending erosion of profit and receiving of political guilt.
In places like this, you can’t win. It’s simply too late.
If you’re like me and spend a lot of time in emerging economies that have a lot going for them, it can be easy to focus so much on the opportunity that you begin to forget how bad some of the western world economies are.
Getting a second residency in some European countries isn’t that hard. I imagine governments like Spain realize that they, too, should be using the same tactics the Land of the Free has been using for decades to attract tax slaves to come and pay their bills.
If you haven’t moved your business offshore, there are some simple strategies you can likely use to minimize your tax burden and remove yourself from the process of being a slave to a country like Spain that will only suck you dry.