Will Shadow Economies Darken the Future of Europe?
Shadow markets have come to represent more than 18 percent of the economic activity in the eurozone, according to a new study by Spanish officials. This is in line with previous independent assessments conducted by experts and economists over the past few years, The Corner reports.
Compounding the problem of economic stagnancy for governments in the euro area, the shadow economy poses a serious threat to government funding and possibly to the future economic stability of the region, as well. With off-the-books transactions accounting for more than a quarter of activity in many southern European countries — hitting 29 percent in Spain, according to the study — it’s no wonder that governments are having a tough time collecting enough revenues to pay their ever-increasing bills.
While the traditional concept of a shadow economy is embedded in the notion of organized crime, it’s not just the mafia that is doing business under the table these days. With VAT rates soaring in addition to corporate and income taxes, many businesses are deciding to cut the government out of the equation entirely, The Corner says. Some businesses apparently decide to dramatically under-report their income streams, effectively paying taxes on only a small part of their operations.
This is not to mention illegal industries that have thrived in the businesses of tobacco, prostitution, fake designer products, and illegal substances.