The grey economy has expanded to about 7 per cent of the GNI

Helsinki (20.08.2010 - Juhani Artto)

According to a new thorough study the grey (formerly black) economy was in 2008 somewhere between 10 and 14 billion euros. Using EUR12 billion as the amount the provision of the grey economy would have been 6.5 per cent of the gross national income (EUR 184 billion).

In 2009 the provision probably jumped to at least 7.0 per cent as the GNI fell by 7.8 per cent to EUR171 billion and nothing indicates that the grey economy has shrunk in any way or fashion.

These figures mean that the provision of the grey economy has expanded at a frightening space. In the mid 1990's the provision was estimated to be about 4-5 per cent.

The latest study confirms the commonly held perception that the legislation and the control mechanisms do not effectively counter the criminal actors at work in the grey economy. The researchers offer a long list of proposals for reforms and changes that are needed if the problem is seriously to be tackled.

However, leading politicians seem unconcerned and are doing little to effectively control the grey economy. And this is reflected in the budget preparation of the Ministry of Finance. The Ministry used a red pencil to scrap the modest proposals of the Ministry of Justice and the Ministry of the Interior to hire more personnel to fight the grey economy.

Financially this does not make sense as more personnel would mean more tax incomes for the State. The grey economy also distorts conditions of competition between honest and dishonest companies and entrepreneurs.

The trade union movement resolutely supports tighter legislation and control on the grey economy. It is often forgotten that organised labour suffers just as much or even more than honest companies and the national economy. Our unions are keen to remind everyone that it is often the same shady entrepreneurs that are guilty of tax evasion and who offer employees the most miserable working conditions.

According to the study, the vast majority of these rotten companies are small organisations in the construction, catering and transport industries.

Internationalisation of the Finnish business world has made it more difficult to tackle the grey economy problem, the researchers conclude.

The study was commissioned by the Parliamentary Audit Committee. This small group of researchers was led by Markku Hirvonen, who is the most experienced researcher into the grey economy in Finland.