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High price of Ireland’s black economy: €5bn pa in lost taxes

The Government must clampdown on tax-dodging businesses, racketeering and dole cheats to tackle the growing black economy, it has been claimed.

The Irish Small and Medium Enterprises Association estimated five billion euro was being lost in taxes a year because of illegal work practices.

It highlighted workers signing-on while secretly working and accused builders of undercutting competitors by offering VAT-free cash prices to customers.

Isme chief Mark Fielding said: "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 labour market, addressing social welfare fraud and cutting red tape and a total revamp of the department of Social Protection."

Isme warned legitimate business would go bust, jobs would be lost and the state would continue to be out of pocket unless tough measures were taken.

It estimated the black economy in Ireland amounted to around 25 billion euro this year.

Mr Fielding said there had been a shift towards a cash-only 'shadow' economy, particularly in the construction and maintenance sectors.

He said customers were mow urging businesses to charge 'off the books' to get cheaper prices by not having to pay VAT.

The Isme chief also said some people were secretly taking temporary work while signing on for illegitimate dole payments.

"It is also vital that there is an immediate clamp down on racketeering and rogue operators as evidenced by the level of seizures of contraband, and yet the massive amount of illegal goods that are available in the marketplace, which is costing the exchequer millions of euro per annum," he added.

Isme urged the Government to embark on a high-profile public campaign to warn of the consequences of taking part in the shadow economy, and to introduce tougher penalties.

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Other demands include greater policing of the social welfare system, an overhaul of the Department of Social Protection to facilitate employment opportunities and tax incentives for home-owners using tax compliant businesses.

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