BUSINESS

Billions are lost in the shadows

EIRINI CHRYSOLORA

TAGS: Economy, Finance

The state could have cashed in revenues amounting to three times the takings of the Single Property Tax (ENFIA) every year if Greece’s illegal economy had been contained to the average level of developed nations in Europe, financial analysts noted on Monday following an International Monetary Fund working text on the matter.

The IMF’s “Explaining the Shadow Economy in Europe” document, published on Friday, places Greece among the states with the biggest illicit economies. Greece’s black economy came to 30.2 percent of the overall economy in 2016, the latest year that data are available for: This is almost the same as the share of the country’s gross domestic product that was lost in the decade-long crisis.

That rate is higher than the 28.1 percent of GDP rate that the illegal economy amounted to in 2000, but down from the rate of 32.2 percent in 2009, when the crisis had just broken out. Given the decline of construction in the crisis years – a sector where illicit transactions used to be relatively common – analysts argue that the shadow economy must have soared recently in other areas of the economy.

The IMF study found the highest illegal economy rates in Eastern Europe, with Kosovo reaching up to 38.8 percent of GDP, Bulgaria at 37.8 percent and Estonia at 36.8 percent. On the other hand, Austria’s illicit economy amounted to just 9.4 percent of GDP, in Luxembourg it came to 9.7 percent and in Switzerland 9.8 percent. According to the IMF analysts, developed economies (where Greece also belongs) had an average rate of 15-20 percent, and developing economies ranged between 30 and 35 percent.

Therefore, were Greece to reduce its shadow economy to 15 percent, it could incorporate almost 30 billion euros into its income, as GDP stands just below 200 billion euros. Analysts estimate that the average tax rate on that income, around 20-30 percent, would mean extra takings of 6-9 billion euros per year for the state, which would amount to three or four percentage points of GDP, or three years’ worth of ENFIA revenues.

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