According to a recent news article in The Irish Central (from newly-released figures from the Irish Small and Medium Enterprises Association [ISME]) it might not be such good news for the Irish government that the black economy is experiencing an intense revival. Indeed, figures showed that this success was actually causing the government “$7billion in lost taxes since the collapse of the Celtic Tiger.” Clearly not good news.
And it doesn’t look like things are set to improve any time soon either. This figure looks set to further expand, according to the ISME, “unless the government clampdown on businesses and tradesmen working for cash and social welfare cheats, thus defrauding the system.” What’s happening is that people are claiming unemployment benefit, while simultaneously working for a salary from “cowboy employers.”
Future Problems
And why wouldn’t they, if they can get away with it? Since there are deals being put out there that are coming without VAT, the construction workers are being able to “undercut competitors” in this realm “as the construction industry comes to term with the near collapse of all trade in the current recession.” ISME’s chief executive Mark Fielding was reported to have said in The Irish Examiner that, “the level of black or unobserved economy activities depends on the incentives and opportunities to cheat. It is vital that the Government reduce the incentives to take business underground, by reviewing tax rates and public utility costs, by deregulating the labor market, addressing social welfare fraud and cutting red tape and a total revamp of the department of Social Protection.”
Of course, as Fielding notes, this has to lead to the real deal – the “legitimate businesses” – going under, along with escalating unemployment, simultaneous with a substantial loss of “tax revenue while the black economy thrives in Ireland.” And the black economy accounts for a lot – an estimated $35bn of Irish businesses in 2011. So it’s not something to sniff at. And of course people are pushing companies to pay under the table in an effort to get things for much cheaper and avoid VAT payments. Clearly this must be stopped.
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