|
Korea's underground economy, including private loans and undocumented transactions for tax evasion, is equivalent to about 30 percent of the country's gross domestic product, a report has found. Experts say that the government should cut taxes and ease business regulations to put an end to illicit economic activities.
The Korea Chamber of Commerce and Industry said in a report on Thursday that a study of the amount of currency in circulation and tax revenue showed that the country's black market is worth between W170 and W250 trillion (US$1=W940), some 20 to 30 percent of Korea's GDP of W848 trillion in 2006.
That proportion is much higher than that of the U.S. (8.4 percent), Japan (10.8 percent), Austria (10.9 percent), China (15.6 percent), and Hong Kong (16.6 percent).
The chamber said that the black market creates a vicious circle where a decrease in the government's tax revenue deteriorates the quality of public services and prompts higher tax rates to compensate, which in turn ultimately impedes economic growth. The report cited tax hikes, increased regulations, increased government spending, and unemployment as causes for the growing black market.
The KCCI explained that an increase in taxes, like the composite real estate tax and real estate sales tax, strangles the real estate market and causes unemployment in relevant industries. That in turn causes side effects such as economic recession and increasing transactions in the black market. It added that increased regulations are also bound to lead to more illicit financial transactions.
To reduce the size of the black market, the chamber recommended the government cut taxes, ease business regulations, enhance flexibility in the labor market, and transfer greater economic authority to the private sector.
(englishnews@chosun.com )
|
