The black economy is nearing its full potential in Portugal with some €46 billion now estimated to be traded without trace or taxation.
Despite the political rhetoric, and the punitive weapons being employed by an increasingly despotic tax authority, the efforts are failing as the real unregistered economy has grown to the equivalent of 26.8% of GDP.
This shocking new estimate released today by the Centre for Economics and Fraud Management at the University of Oporto covers 2013 and has been calculated using more accurate criteria than the Institute for National Statistics whose figures the government uses.
The government measures designed to fight tax evasion appear to have had little or no impact on a healthy underground economy as €46 billion has slipped past the taxman in a 12 month period, the equivalent of six times the NHS budget.
Óscar Afonso, vice president of the Centre, admits that the impact of the taxation regulations and record levels for fines may yet be felt as the figures released are from 2013, not 2014.
Afonso does claim that initiatives such as the draw for a free Audi "will not be enough" as the state is not doing anything much, for example, about offshore accounts, the abuse of double taxation agreements, the creation of ghost companies and accounting practices of some of Portugal's largest companies which shed profits to offshore holding companies.
The Centre’s 26.8% of GDP figure for the black economy, which by its own admission is an understatement, is closer to reality than the politically expedient estimate used by the government that the black economy is worth just 13% of GDP.
Óscar Afonso defends his figure as the Centre uses "scientific methodologies, tested, validated and certified. The first version of the index was published in an international journal and was accepted."
The difference may be explained by the selective criteria used by the Institute of Statistics which for example adds in estimates for drugs and prostitution whereas the Centre for Economics and Fraud Management takes into account trafficking in weapons, trade in animals, money laundering, and trafficking in human beings other than for prostitution.
The tacit cooperation pact between government and the public was long ago abandoned after the tax authority made it clear through its actions that the taxpayer is guilty until proven innocent, government expenditure has not been curbed as promised, shortfalls in public spending cuts have been made up by higher taxes, and that the taxpayer is seen as an easy mark when government inefficiencies mean its targets are missed.
