Reporting shadow economy activity (tax evasion)

Overview

What is shadow economy activity?

In general, shadow economy activity is activity in respect of which businesses (including professions) and individuals engage in inappropriate practices to avoid their legal obligations relating to matters such as taxes & duties, PRSI, licences and employment.

Shadow economy activity includes:

  • not declaring, or under-declaring, a source of taxable income
  • employers paying employees in cash under an 'off the books' arrangement so as to evade tax and PRSI liabilities
  • working or running a business whilst at the same time falsely claiming job-seekers benefit from the Department of Employment Affairs and Social Protection (DEASP)
  • non-operation of the Value-Added Tax (VAT) system
  • tobacco smuggling, including the sale of illegal tobacco products
  • oil laundering, including the sale of washed diesel.

Most of the shadow economy activity takes place where the payment of goods and services is by way of cash.

What are the main effects of shadow economy activity?

Shadow economy activity:

  • reduces tax, duty and other revenues owing to the State
  • creates an uneven business playing field that has a negative impact on legitimate businesses as regards competitiveness, sustainability and long-term job creation.

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