However, Ireland compares favourably with the rest of Europe, with the shadow economy depriving taxpayers of an estimated €2.1 trillion in lost revenue across the region, according to a new report commissioned and published by Visa Europe.
Ireland has the sixth lowest rate of shadow activity in Europe, it found.
Conor Langford, vice president Ireland at Visa Europe, said: “The report reveals the scale of the shadow economy in Ireland which is fuelled by cash and set to be worth €20bn this year.
“While we are currently ranked sixth lowest in terms of shadow activities in Europe, there is still much work to be done.
“We welcome the recent launch of Ireland’s national payments plan and other such market initiatives that drive collaborative, concentrated efforts around electronic payments that will have a tremendous impact on the shadow economy in Ireland and could quickly reduce it by €2bn,” he said.
In the years leading up to 2009, the size of the black economy had been on the decrease as Governments had stepped up efforts to tackle illegal practices.
However, the economic collapse over the past few years has once again seen the scale of shadow practices increase as employees turned to cash payments to offset squeezed incomes.
There is a sizeable divergence between the size of the black economy in northern and southern European countries. This ranges from 8%-10% of GDP in Switzerland, Austria, the Netherlands and the UK, to nearly 30% of GDP in Bulgaria, Croatia, Lithuania and Estonia.
The report, ‘The Shadow Economy in Europe, 2013: Using electronic payment systems to combat the shadow economy’ shows Ireland has the sixth lowest level of shadow economy activity in Europe in relation to GDP.
The report also confirms the shadow economy has reduced since 2012, when it was estimated to be worth €20.7bn. This, as well as the country’s relatively low level of shadow activities in comparison to other European countries, is mainly attributed to widespread card usage and acceptance of electronic payments.