Black market costs State €2bn in lost tax

TWO billion euro a year is being lost in tax revenue because spiralling costs are forcing Irish businesses to operate in the black economy.

Business leaders warned yesterday that 25,000 jobs have been lost in Ireland over the past year, 17,500 of these in the manufacturing sector.

Up to 70% of these jobs were lost as a direct result of increased costs, the Irish Small and Medium Enterprises organisation said.

ISME chairman Robert Berney said the amount of tax being evaded was enough to pay for the benchmarking agreement. This €2bn black hole must be tackled as it poses a serious threat to business and the economy as a whole, he said.

“Whether we like it or not, Ireland has become an expensive and difficult place to run an enterprise and many businesses are being forced into the shadow economy simply in order to survive.

"This is having serious ramifications for legitimate companies who have their businesses and livelihoods threatened by black economy operators,” he told the group’s 10th annual conference yesterday.

The greatest cost hike for business has been in insurance, with premiums rising 290% in the last three years and 55% in the last year alone.

Mr Berney said the resources of the Revenue Commissioners were focused on compliant taxpayers, with seemingly little or no effort being spent in tackling non-compliant companies.

“Up until a few years ago the black economy was viewed predominantly in terms of individuals involved in doing nixers. It would appear that complete businesses have moved out of the legitimate economy,” Mr Berney said.

He called on the Minister for Justice to clamp down further on racketeering and rogue operators.

He said the Department of Justice, in association with the Criminal Assets Bureau, the gardaí, Revenue and other State agencies, should co-ordinate their resources to identify individuals, companies and particular sectors operating in the black economy.

A spokesman for the Revenue Commissioners said its performance over the past number of years scuppers any suggestion that Revenue is not tough on tax evasion.

“We have to date collected €800 million-plus from investigations into DIRT, non-resident accounts, Ansbacher, NIB/CMI and offshore accounts and so on,” the spokesman said.

Mr Berney attributed the growth in the number of businesses operating in the black economy to increased costs including local government charges, insurance, labour and energy costs.

The core of black economy activities is estimated to account for between 5% and 6% of GDP annually, which equates to over 6bn, he said. But it was no longer just individuals who were working in the black economy. Previously legitimate companies were being forced to evade tax.

The industries most at risk were private security, cleaning, construction and retail businesses.