Underground economy


  • Unreported income and business activities
  • Development of parallel economies
  • Black market economy
  • Shadow economy
  • Black market trading
  • Unreported financial transactions
  • Underground and illicit business
  • Black-markets
  • Second economy
  • Illegal private profit
  • Black marketeers
  • Underground trade
  • Undeclared income
  • Unofficial earnings
  • Informal markets

Incidence

Unreported business activities and cash transactions occur in most countries and are the continuing subject of investigation by tax authorities. These activities include drug trafficking, gambling, prostitution, loan-sharking, bribery, use of state property for private gain, employment of workers without a permit and without paying social costs and misappropriation of public funds. In 1994 in the UK it was estimated by government tax authorities that the underground economy had reached a volume of £50 billion per year, namely more than twice the annual defence budget.

As its name implies, the second economy refers to all unlawful activities taking place outside the state-controlled economic system. It is centred primarily around the illegal production and distribution of goods and services for private profit. This illegal system has persevered and has even played a useful role in filling the gap resulting from the inefficient performance of the 'first' economy. However, one of its disadvantages is that it has given birth to a new privileged class that enjoys many amenities and luxuries not available to the majority of the population.


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