Business chiefs have demanded zero tolerance of the black market amid claims that it takes 861 million euro out of state coffers every year.
At least 12% of all diesel and a quarter of all cigarettes sold in Ireland are illegal, a study of illicit trade has found.
Frank Gleeson, chairman of Retail Ireland, called for a 10,000-euro reward for whistleblowers as part of a radical new crackdown. "The scale of the lost revenue means it makes economic sense to invest more in tackling the problem," he said.
The study, Tackling the Black Market and Retail Crime, reports that, since 2010, 19 illegal fuel laundries have been detected and closed and 690,000 litres of oil seized.
Around 109 million illegal cigarettes, worth 45.9 million euro, were seized last year.
The study, by EPS Consulting for Retail Ireland, also examined online activity with downloads from the internet. It noted industry estimates that 770,000 individuals in Ireland have downloaded music/films illegally.
Ireland ranks 11th out of 22 countries in Europe for shoplifting rates, with employee theft accounting for one-third which is the highest rate in Europe, according to the study. It called for Garda resources to be redeployed from road traffic policing and into law enforcement.
Current and future state payments, benefits and concessions should be reduced from persons and businesses found guilty of black market trading to the value of the loss to the Exchequer of the goods smuggled, counterfeited or stolen, it said, adding that custodial sentences should be imposed for the most serious offences.
A breakdown of black market activity shows that fuel laundering costs 155 million euro a year, illegal tobacco trade 526 million euro, shoplifting and theft 110 million euro, counterfeit goods 62 million euro, digital piracy 4.5 million euro and petrol theft 3.5 million euro.
Derek Keating, Fine Gael Dublin Mid West TD, said: "While every effort has to be made on the part of the authorities to outlaw criminal activity such as this, it is incumbent on every single one of us to play our part in ensuring that the black market economy does not thrive during these straitened times."