'Black economy' costs Irish exchequer €4 billion
Businesses are facing closure and the Irish government is losing billions of euros in revenue as a consequence of the actions of 'cowboys', gangsters, and racketeers, an industry support group has claimed.
ISME, the Irish Small and Medium Enterprises Association, said estimates put the value of black economy activities at 14% of GDP, which would equate to £18.7bn this year, or £362m per week, but anecdotally the figure could be much higher.
The amount of lost taxes is conservatively estimated at £3.8bn, which could substantially reverse the state's exchequer revenue shortfall.
ISME chief executive Mark Fielding said that there has been a marked increase in black economy activities and the development of a strong 'nixer' culture during the economic slowdown, which is undermining law-abiding and tax-compliant enterprises, threatening jobs in the process.
The term 'nixer' economy refers to employed people charging work for services outside hours.
Mr Fielding said: "The 'nixer' culture is very much alive and well, as the economic crisis continues and there has been a noticeable shift towards a 'cash only' shadow economy," he said.
"This is particularly evident in the construction sector, where there are increased incidences of 'jobs for cash', completely undercutting legitimate companies. Many of these companies have reported that potential clients are demanding that they pay 'off the books' to save VAT," he explained.
"The attractiveness of Ireland's social welfare system is also contributing substantially to the ongoing problem.
"The system offers a significant incentive to operate within the shadow economy, encouraging undisclosed employment without taxes or regulations, while claiming subsistence from the state," said Mr Fielding.
"We are concerned that any further increase in income tax rates in the upcoming Budget will add to the problem, making it more attractive to work in the black economy rather than remain in gainful employment.
"It is imperative that there is an immediate clampdown on racketeering and rogue operators as evidenced by the high-level seizures of contraband, and the massive amount of illegal goods that are available in the marketplace, which is costing the exchequer millions of euro per annum," urged Mr Fielding.
"The level of black economy activities depends on the incentives and opportunities to cheat," he added.