Black economy – otherwise gray economy, shadow economy, “underground” economy, i.e. an economic activity that is not declared for tax purposes. The black economy is not covered by official statistics and therefore it is impossible to accurately measure.
It is estimated that due to the functioning of the black economy, lost tax revenues amount to at least 3-5% of GDP.
The largest concentration of the black economy is most likely related to the personal services sector and remedial work.
Types of black economy
As part of the black economy, we can distinguish its two types:
- gray zone – activities in accordance with the law, but not registered for tax purposes, i.e. illegal trade in legal goods and services, in order to avoid paying taxes and bearing other costs,
- black market – illegal activity, illegal trade in illegal goods or services, eg drug trafficking, weapons, people, counterfeiting, prostitution, piracy.
The effects of the gray zone
The existence of the shadow economy entails a number of negative consequences in several areas:
- state budget – no part of taxes due,
- enterprises – companies operating in accordance with the law are less competitive and are in a worse situation than entrepreneurs operating in the shadow economy,
- employees – people working in the gray zone do not belong to the social security system.
Goods and services available on the black market
Products and services that are traded on the black market are:
- illegal goods such as drugs, weapons, people,
- copyrighted materials for which the entity is not authorized,
- performing illegal services,
- trade in illegally cut wood,
- trade in illegal animal-related items (e.g. ivory, rhinoceros horns),
- trafficking in human organs,
- trading in legal goods that originate from theft,
- trade in contraband foreign goods, excluding taxes, such as excise duty or VAT,
- currency trading at a rate other than the fixed exchange rate set by the central bank.
Prices of goods and services on the black market
Goods and services on the black market may be:
- lower than market prices – because they are not subject to taxation, other costs and guarantees,
- higher than market ones – when their production process is expensive due to the possession of appropriate knowledge and work expenditure, their transport is associated with danger, and trade in them is severely punished.