ANKARA - The rate of unregistered economy in Turkey is double the average among members of the Organization for Economic Cooperation and Development. Unregistered economy in Turkey constitutes 32.1 percent of the country’s economy, says OECD.
With an unregistered economy rate of 32.1 percent, Turkey has one of the highest rates of illegal markets among OECD countries.
According to data from the Organization for Economic Cooperation and Development, or OECD, Turkey’s unregistered economy rate is much higher than the average among members.
Based on an action plan to fight illegal markets, which is coordinated by the Ministry of Finance and prepared by related institutes, the average percentage of the unregistered economy in developing countries is 41 percent. The unregistered economy rate in transition countries is 38 percent. Among OECD members, the unregistered economy rate stands at 18 percent, while Turkey’s stands at 32.1 percent.
Illegal markets in Greece constitutes 28.6 percent of the country’s entire economy, while Italy’s unregistered economy rate stands at 27 percent and Belgium’s at 23.2 percent. Based on the data collected for the same action plan the unregistered economy rate in Spain is 22.6 percent, while Sweden’s is 18.1 percent. Illegal trade in Germany, France and the Netherlands constitutes 16.3 percent, 15.3 percent and 13 percent, respectively, of their nation’s economies. The unregistered economy in the United Kingdom is worth 12.6 percent of its economy, while in Austria, it is about 10.2 percent. Switzerland had the lowest rate of illegal markets with 8.8 percent.
Taxation and social security contributions are the main factors in determining the size of unregistered economies all around the world. Due to the fact that there is no universal description of unregistered markets in Turkey, the information on the actual size of the unregistered economy in the country is hazy. The figures on the topic vary anywhere from 23 percent to 66.2 percent. The unregistered economy rate in Turkey, as calculated by Ministry of Finance officials, is somewhere in between 26.12 percent and 37.26 percent. On the other hand based on the calculations of the OECD, the unregistered economy in Turkey constitutes 32.1 percent of the country’s entire economy.
Transparency a must
While a lack of social conscience is one of the reasons behind illegal markets accounting for such a large part of the economy as a whole, another reason is the failure of establishing transparency in public administrations.
"There are many services the public administration needs to provide, including defense and domestic security, justice, education, health and an infrastructure. Providing public services effectively and timely gets tougher as the tax administrations fail to collect taxes, the main source of income for the state. This situation causes erosion in the tax base as well as causing loss of control over resources," said the plan. "The principle of justice and equality is also disrupted to the disadvantage of those who actually pay their taxes regularly."
There are consequences a country faces as a result of the unregistered economy.
Statistical consequences: Since the unregistered economy is not listed in official records, the indices of the registered economy fail to coincide with the overall picture. Many indicators end up painting a faulty picture, causing economic and financial policies based on these false indicators fail.
Resource utilization: Taxes the government fails to collect due from illegal markets disrupts effective resource distribution. Resources are directed to unproductive areas. As the unregistered economy causes losses from taxes and premiums, it causes further budget deficits, bearing the need to implement tax hikes.
Unfair competition: In an environment dominated by unregistered economy, companies that are unproductive are provided with the opportunity to engage in unregistered economy and continue their operations, instead of pulling out of the market and ending their operations. The economy continues its growth in a double standard.