The sistema de módulos that many small businesses and self-employed workers use to pay their annual taxes in quarterly installments instead of once a year exempts them from doing their accounting work. The Ministry of Finance estimates their tax obligation based on factors like power usage, the number of workers employed, the size of the building or the number of vehicles used to run these businesses. The módulos system is simpler and keeps the national tax agency from doing extra paperwork, but fraud in this tax sphere has been high traditionally and it is not always the most advantageous choice for the businesses that choose to pay taxes this way.
When a business starts up or goes through tough financial times, it is useful to analyze its accounts and try to find methods for reducing its tax burden. Still, during boon times a fixed-installment tax schedule allows these businesses to pay less than they would if their tax schedule were variable and related to their growing operations and profits. High levels of fraud exist because the companies are not registered in the system based on the volume of business that they do, and these companies end up selling a lot of products and services that the tax agency never knows about.
This year the módulos system is being cancelled for small companies and self-employed workers whose billing reflects that they do more than 50% of their operations with outside companies. The measure aims to cut down on businesses that deal with other companies, independent of how much volume they do, and cut down on the módulos taxes that consumers end up paying for.
Requiring some sort of accounting and tax obligation is not too much to ask of these small companies, and these requirements could even offer significant advantages. First, the companies will have a realistic picture of the financials of their business. Second, self-employed workers will be able to access loans more easily during times of slow or no business. Montoro is choosing a great time to nix the módulos system. Affected companies will have to accept the changes after the Finance Ministry has pinpointed an area where fraud is common and is helping to increase competitiveness and the entrepreneurial spririt in Spain.