Swiss Economist Expresses Fears Over Growing 'Shadow Economy'

by Ulrika Lomas, Tax-News.com, Brussels

03 January 2003

Citing a study recently conducted by Professor Friedrich Schneider of the University of Linz in Austria, the Swissinfo news service announced that Switzerland's 'shadow economy' is the country's fastest growing economic sector.

In his report, compiled late last year, Professor Schneider revealed that in order to avoid paying tax and social insurance contributions, more and more Swiss are resorting to working illegally.

Although, according to the study, the total number of workers employed within the shadow economy is estimated at between 700,000 and one million, the number of Swiss citizens thought to be employed in undeclared or unofficial positions is around 500,000.

However, despite the fact that illegal workers in the Alpine jurisdiction earned around SFr39 billion in 2002 - representing 9.5% of GDP - it is not all bad news for Switzerland, according to Swissinfo, as:

'The study found that, along with the United States, Switzerland has the lowest percentage of illegal workers, due to its low tax rates.'

Nevertheless, the news service revealed, the Swiss government is determined to crack down on this form of tax evasion, and has put together plans to simplify the process for paying social insurance and facilitate more effective information sharing procedures between federal departments.

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