Madrid recently began requiring the homeless to report their income from activities such as begging, performing in the street or selling trinkets and scrap metal for taxing purposes.

Social workers and advocates for the homeless claim this is a tax on the city’s poorest inhabitants, but government officials assert this policy has been in effect for years and is simply a method of keeping financial information up-to-date to properly allocate funds for government assistance.

Many homeless in Madrid receive monthly minimum income benefits in the form of Renta Mínima de Inserción (RMI). When applying for these benefits, they state how they make a living and report the income they gain from this occupation. The government then deducts that income from the benefits they’re eligible for in the form of a tax on their monthly earnings.

It is very hard for individuals receiving RMI to break the cycle of poverty and/or homelessness, and statistics show that nearly a third of those receiving this financial assistance have received it for five years or more. Many live off government assistance for even longer, about 11.6 percent of individuals currently receiving RMI have done so for more than a decade. Due to the arcane system of taxation and reductions to RMI, it is nearly impossible for many of Madrid’s citizens to do much more than subsist, leaving them with few options to improve their lives and livelihoods. 

Administration of the Tax on Madrid’s Homeless

Besides placing a burden on Madrid’s most underprivileged citizens, the logistics of accurately verifying and keeping track of this information seem nearly impossible. How the homeless can keep track of their income, if they have any, poses a problem for the Spanish bureaucracy. How exactly can the government confirm the income reported to them by people who make their living in the street?

Many homeless individuals in Spain do not engage in begging or other forms of alternative commerce to make a living, but when they apply for benefits they will often be accused of lying if they claim no income.

Luis Saenz, a social worker who works with the homeless through his job at the organization RMI Tu Derecho says that if the homeless claim they have no income, “The insinuation is that if they are not declaring income of any kind, it’s because they are concealing it.” Due to this, he claims that many people simply make up an occupation and a random number in order to keep receiving benefits.

Government Rationale for Taxing Madrid’s Homeless

Government officials claim they use the figures reported by the homeless to ascertain the financial status of the homeless community in the city and to aid in the calculation of funds used for the RMI. Based upon the subjectivity of figures reported by the homeless community, there is a good chance this information is not accurate, which means it is highly likely the statistics are faulty. The consequences are even worse for people who have to declare income they are not earning, because they will be forced to endure a monetary reduction in their benefits that is not being offset by money earned by informal economic activities.

This new policy is based on a law that requires individuals receiving government benefits to self-report income that cannot be objectively assessed. This law is supposed to prevent employees and employers from committing tax fraud in cases where an employee is a temporary employee or works without a contract, and many have labeled its application toward the homeless community as unfair and unjust. Saenz says that the “income statement became a requirement with other activities in mind, chiefly earnings from the underground economy that were not being taxed or subjected to social security contributions. But now they are including survival activities that hardly qualify as economic occupation.”

The difference between non-contractual or temporary employment and informal economic activities such as begging is fairly obvious, and it is clear to see how this law cannot be applied consistently to the homeless population without inflicting severe economic distress. An employee has at least some dependable metric to rely on to calculate their earnings, even if this is based on variables such as commission on items sold or the amount of produce picked. A homeless woman attempting to scrape together a living through panhandling or performing in the street has no such reliable way to predict her monthly income. Depending on the day or time of year, her earnings or lack thereof might vary drastically, often seeming to follow a random pattern based on factors beyond her control.

Income Disparity Is Increasing in Madrid

Homelessness, unemployment and poverty are very pressing issues in Spain, which has the third highest rate of economic inequality in the European Union. And rather than improving, the situation is growing ever more serious; since 2007 economic inequality in Spain has risen more than in any other European Union country.

 Until government officials find a way to help lift the homeless out of their impoverished situation instead of taxing economic activities, this income gap is likely to grow even wider, meaning that the government will have to spend even more money providing RMI for Madrid’s most impoverished. The bubble is bound to burst sooner or later, and Madrid must find a viable solution that will remedy the city’s epidemic of chronic homelessness.