Within 2024, the “shadow economy” in Germany is expected to grow by 8.4%, approaching 481 billion euros. This is the result of recent research by the Institute for Applied Economic Research (IAW) in Tübingen, Germany in collaboration with the University of Linz in Austria. The experts, who have been following the course of the underground economy since 2002, estimate that this year its turnover will increase by 38 billion euros. It is the first time after 2021 that an upward trend is recorded again.

“There can be no exact data, of course, no one can accurately record the undeclared work,” Friedrich Schneider, a professor at the University of Leeds, told the German News Agency (dpa). However, experts try to approximate the overall size of the underground economy, using a range of variables such as recorded tax evasion and financial crime figures, demand for cash, consumer spending figures and even consumption electricity.

He is concerned about the rise in VAT

For 2024, two important developments are recorded with diametrically opposite results. On the one hand, the increase in benefits for the economically weaker is expected to cause a significant blow to the informal economy, while increasing the number of households entitled to benefits. On the other hand, experts are concerned that the return of the high VAT rate of 19% to catering from January 1 amounts to an incentive for higher tax evasion and the shadow economy in this sector.

The study attempts to capture all the undeclared income, from the white flesh trade and other organized crime activities to the seemingly innocent pocket money for the young man who helps with chores around the house or mows the lawn in the garden. According to earlier research in Germany, the construction sector is particularly prone to the shadow economy, followed by wholesale and retail trade and catering. But it seems that the “underground economy next door” is also widespread.

Example: According to data from the “Socio-Economic Panel” (SOEP), a data bank on household consumption behavior that has been operating since 1984, more than 4.3 million households in Germany currently employ, even occasionally, a domestic helper or other persons in related activities. However, only 45,800 people are officially registered as domestic workers with full-time status, while another 287,000 people are also registered, but only as occasional workers with a monthly flat rate (mini jobs). This means that nine out of ten domestic workers remain “unseen” for official statistics.

Good “placement» in Europe

However, if we calculate the shadow economy as a percentage of GDP, Germany is below the average of the richest industrialized countries of the West. According to the study prepared by the German IAW and the University of Linz, the percentage of the “shadow economy” in Germany does not exceed 11.3%. The lowest rates internationally are recorded in the USA (5.6%) and Switzerland (7.1%).

Greece (21.9%) and Italy (21.6%) are declared the champions of the underground economy, while the rates are also unusually high in Belgium (17.4%), Spain (17.2%) and Portugal ( 17.2%).