Austerity Measures in Portugal Lead to Tax Dodging

January 16, 2012 Taxation in Portugal

Underground economy in PortugalLISBON – As Portugal faces austerity measures, more taxpayers are turning the underground economy and choosing to hide from their tax obligations.

New research published on January 16th by the University of Porto shows that value of the underground economy of Portugal grew by 2.5 percent in 2010, reaching a total worth of approximately 24.8 percent of the national GDP that year, and the unreported activity led to lost tax revenues of approximately EUR 8 billion for the year.

The new data indicates that the shadow economy in Portugal is much higher than in most other OECD countries in Europe, which have estimated underground economies worth 17 percent of the GDP on average. According to the authors of the new report, the only countries with higher levels of unreported economic activity are Greece.

Oscar Afonso, one of the authors of the study and the deputy chief of the Observatory of Economy and Fraud Monitoring at the University of Porto, has already commented on the preliminary findings of the ongoing research for 2011, saying that the research indicates that the unregistered economy is currently growing larger. He explained that the difficult economic conditions faced by Portugal and other European countries during the 2010 and 2011 fiscal years forced the national government to instate a number of austerity measures, which, so far, have failed to reduce the level of unemployment in Portuguese society, and cumulatively these factors sparked new growth of the underground economy in the country.

Photo by carboila