February 6, 2001. Copyright 2001. Graphic News. All rights reserved.

EU TAX-DODGING ON THE RISE

LONDON, February 6, Graphic News: THE ÒblackÓ economy equalled 29% of GreeceÕs gross domestic product (GDP) in 1999, a bigger slice of national output than any other OECD country, according to new estimates by Austrian economist Friedrich Schneider of the University of Linz. 

The black economy -- which ranges from illegal markets such as prostitution to working for cash, not declaring the income on a part-time job and not paying VAT -- is by nature hard to measure.

By comparing estimates between 1989 and 1999 Schneider concludes that the underground economyÕs share of national output grew in every OECD country, with European Union countries accounting for seven of the highest eight offenders. Switzerland has the smallest underground economy, equal to 8.9% of GDP.

In Austria, which has one of the lowest rates, tax-dodgers pocketed an astronomical $18.8 billion  -- equivalent to $2,350 for each citizen.

A separate survey by Paul Webley of Exeter University found that in France -- where the shadow economy accounts for 15% of GDP -- up to 54% of Parisians admitted to evading tax.

Around 12.5% per cent of BritainÕs GDP is accounted for by the black economy, compared with 19% per cent of NorwayÕs. Yet only 57% of Norwegians said they would cheat if they could, compared with 70% of Britons.

In Germany, where shadow economics has grown from 2% in 1960 to 16% of GDP in 1999, rule changes allow the unemployed to take officially registered part-time jobs that are free of income tax. The changes have been introduced in an effort to attract moonlighters.

ÒIf the shadow economy continues to expand so quickly, ever fewer individuals will be willing to pay their taxes honestly,Ó Schneider warned. Tougher penalties will do little to help.

Rising tax and social security burdens, in addition to increased government regulation, are blamed for the rise of the shadow economy.
/ENDS
Sources: The Economist, Journal of International Affairs, Reuters