The study was carried out by Professor Friedrich Schneider of the University of Linz in Austria, an expert on the black economy, or what he calls "shadow economy", defined as economic activities that circumvent government regulation or taxation. The main reason for entering the shadow economy is to avoid paying tax and other charges on wages, but it is also attractive to avoid regulation (common in the construction industry) or to allow the employment of workers who are not permitted to work, and can therefore be employed more cheaply. These cases are often combined, so, for instance, a contractor might employ asylum seekers so he can pay them low rates, avoid social security and ignore safety rules.

The economic crisis has had a widespread effect on the black economy, as people whose earnings have gone down (or failed to go up sufficiently) attempt to make up for it by increasing their shadow earnings. In the OECD countries as a whole, the average size of the shadow economy, expressed as a percentage of GDP, has gone up from 13.3% in 2008 to 14% in 2010. In Belgium, the share went up from 17.5% to 17.9%, which represents the equivalent of €61 billion circulating in the economy out of the reach of any regulation.

The Schneider figures correspond to estimates produced earlier this year by the socialist trade union ABVV, which said that tax evasion alone was costing the treasury €20 to €24 billion a year, or 7% of GDP. That figure comes close to the €25 billion hole in the federal budget the government will have to plug in the coming years.

The report lacks a breakdown of those sectors where the shadow economy is most prevalent because the data was not available, Schneider said. However he did provide a breakdown for Germany, Austria and Switzerland which showed that construction was by far the biggest problem sector, followed by the motor trade, the catering industry, entertainment and personal services,
which includes hairdressers and cleaning personnel.

Asked why they had recourse to the shadow economy, the main reason among those polled in the developing countries was too much government regulation, or what Schneider calls "tax rebellion": people feel the government is wasting enough of their money and refuse to give them more. The poor provision of services in the countries of southern Europe is a perennial complaint. The high- tax economies of Scandinavia are also clear targets for tax rebellion. The arrival of Belgium in fifth place on the table, meanwhile, should give the new government, when it is agreed, food for thought.

Black economy as a percentage of GDP
Greece 25.2%
Italy 22.2
Spain 19.8
Portugal 19.7
Belgium 17.9
Sweden 15.6
Norway 15.4 Germany 14.7
Denmark 14.4
Finland 14.3