Dáil Éireann díospóireacht -
Tuesday, 23 Nov 1993

Vol. 436 No. 1

Written Answers. - Black Economy Statistics.

Thomas P. Broughan

Ceist:

58 Mr. Broughan asked the Taoiseach his views on the accuracy of estimates of the Irish black economy contained in a recent paper to the Statistical and Social Inquiry Society where, based on techniques like the expenditure/income gap in initial national accounts tables and the size of the money supply, the black economy was shown as amounting to more than £2 billion or about 8 per cent of GNP; and if he will adjust the national income tables accordingly and indicate the effect of this conservative black economy estimate on the GNP/debt and GDP/debt ratios.

The Taoiseach

The paper, referred to by the Deputy, presented the results of applying a range of research techniques for estimating the size of the black economy in Ireland. However, the paper concluded that the results of the exercise must be viewed as highly tentative since the different approaches used yield different conclusions and suffer from significant limitations.

The CSO already makes a number of explicit adjustments to its income based measure of GNP to incorpate estimates for black economy activities. The most significant adjustment is not non-reporting and under-recording of the income of self-employed traders where the basic data on incomes are derived from the tax collection system. These incomes are grossed using factors calculated by preparing the number of self-employed recorded in the Census of Population and Annual Labour Force Surveys with the numbers making tax returns. This and the other explicit adjustments made for black economy activities presently amount to over 3 per cent of GNP and are reflected in the GNP-debt and GDP-debt ratios.

Black economy activities are also indirectly captured in other components of the GNP compilations, but the amounts of income involved cannot be separately identified or quantified. For instance, the labour supply approach used to estimate wages and salaries implicitly captures earning which may not be reported to the fiscal authorities. Furthermore, income arising in agriculture is measured indirectly using the so-called output approach and is not dependent on the tax declarations of farmers.

The CSO will continue its efforts to improve the coverage of the black economy in the Irish GNP compilations although such activity is, of its very nature, extremely difficult to estimate. A recent decision of the EC Commission has also stipulated a number of measures to be undertaken by all EC member states to ensure that hidden activities are captured equally comprehensively in their GNP estimates. This decision will be published shortly and envisages that, where necessary, member states will incorporate improved estimates for the black economy in the GNP estimates to be provided to the Commission in September 1995 under the terms of Council Directive 89/130/EEC on the harmonisation of the compilation of Gross National Product at market prices.