Bulgaria has the Largest Gray Economy in Europe

Finance | February 28, 2023, Tuesday // 13:41|  views


Estimated at 33.1% of official GDP, the gray economy in Bulgaria is the largest in Europe according to a study conducted by the Department of Economic and Scientific Policy and Policy for the Quality of Life at the request of a committee from the European Parliament.

The report, quoted by Cursdegvernare.ro, was signed by Professor Friedrich Schneider, one of the biggest researchers of this phenomenon.

After Bulgaria, Croatia (29.7%) and Romania (19.0%) are ranked, well above other countries whose grey economies equal to less than 23%of their GDP.

If, after the economic crisis of 2008-2009, the share of the informal economy in European countries has been steadily declining, then in the last three years, in the context of the outbreak of the pandemic and war in Ukraine, it has increased significantly, according to the European analysis.

According to the latest research, the level of the gray economy in Bulgaria has declined since 2003, when it was 35.9% to 29.6% in 2017, is written in the report, but in 2018 it began to rise again to reach 32.4% in 2021 and 33.1% in 2022.

"It is believed that the main engines of this growth are macroeconomic indicators such as the level of unemployment and GDP per capita. Huge public expenses for infrastructure, subsidies for businesses and special transfers for individuals, which led to a significant increase in GDP, combined with reducing unemployment, is expected to help reduce the size of the gray economy in most European countries and the OECD in the coming years," write the study authors.

If in Germany, Austria and Denmark the tax burden (direct and indirect) is the main cause of the gray economy, then in Romania, Italy and Greece the determining factors are the high level of independent labor, unemployment and attitude towards taxes, as well as indirect taxes.

"It is of paramount importance to understand that the creation of additional value for the official economy can be achieved primarily by formalization of the gray economy. Fighting the gray economy is more efficient when illegal activities move from the unofficial in the official sector of the economy, not when removed," the study authors said.

The lack of trust in civil servants, the poor quality of business legislation, tax policy, as well as state support for entrepreneurs, along with relatively high social contributions, corruption, political instability, relatively high taxation and uncertainty about regulatory policies - all this - all this contributes to the growth of the gray economy.

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Tags: Bulgaria, europe, grey, economy


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