Black Economy Impacting Small Firms


The level of unfair competition from ‘black economy operators’ is on the increase and is likely to rise further due to the current economic situation, according to A J Noonan, SFA Chairman. He said the scope, scale and extent of the black economy is causing serious problems for small business, by diverting spend away from legitimate businesses and undermining the ability of Government to collect taxes efficiently and effectively.

According to Noonan, “leakage to the black economy is now estimated to be as high as 14% of GDP or half a billion euro each month is generated that the taxman does not have access to!”

“Recent seizures of contraband point to a significant increase in activity of ‘cowboy operators’. The number of illegal transactions is growing and this poses a very serious threat to the survival of many registered tax compliant businesses. Due to the scale of the drain on the economy, attempts to tackle the problem are long overdue and given that sometimes controversial measures are necessary, a European initiative may be required.”

Apart from the effect on the economy, Noonan warns that workers in the black economy can be among those least protected in terms of employment law; health or social security benefits and often lose the opportunity for security or promotion within the workplace.

The SFA is calling on the Government to take the initiative to tackle the informal economy. This would involve, firstly, increased labour market flexibility, and the further adoption of administrative and tax regimes which favour working in the formal economy and secondly, awareness campaigns highlighting the antisocial nature of informal economy working, combined with tougher enforcement.

The SFA will be presenting (Tuesday, 16th April) to the Joint Oireachtas on Jobs, Enterprise & Innovation, on the concerns regarding the black economy and will proposing additional steps, which it believes should be taken to tackle this growing problem:

  • An awareness campaign among consumers of the consequences of purchasing counterfeit, smuggled goods or paying cash to an illegitimate business.
  • An evaluation of the factors which influence taxpayers’ attitudes to the informal economy.
  • There needs to be a clear message that “crime does not pay”. The criminal justice response to this dishonesty has to be clear and firm.
  • A review of resource levels and increased expenditure on training for those engaged in in tackling the informal economy.

Noonan states “because of reduced overheads those who operate within the informal economy have huge competitive advantages and distort the operation of a competitive labour market. The SFA is urging the Government to become committed to a solution to the growing problems that this activity creates for the small business sector.”

“It is essential that all companies can compete on a level playing field and for the removal of what amount to penalties for compliance through the proper enforcement of the regulations for dealing with those who operate outside the legitimate sector of business,” concluded Noonan.

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