Finance Think: The gray economy “eats away” over 2.5 billion euros of GDP

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Over 2.5 billion euros a year flow through informal channels – money that ends up in private pockets instead of gross domestic product. The Institute for Economic Research and Policy Finance Think measured that the green economy in 2020 will account for 23.2 percent of Gross Domestic Product. According to the research – distrust in the system – ie low tax morale of the population, high corruption and inefficient institutions – are the main reasons for citizens to try to earn money by bypassing the system instead of legally.

However, the trend is declining. The gray economy from 2006 to 2020 has decreased from 31.6 to 23.2 percent. The biggest decline in the shadow economy was with the introduction of the flat tax, then during the financial crisis in 2009 and after the introduction of the minimum wage. The institute is adamant that high fines are not a cure for the shadow economy, but functional institutions.

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