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It is estimated that the 'Black Economy' costs the Irish Economy over €1 billion per month - Leaving Cert Economics - Question 2 - 2008
Question 2
It is estimated that the 'Black Economy' costs the Irish Economy over €1 billion per month. (Irish Small and Medium Enterprises (ISME), August 2007). Explain the un... show full transcript
Worked Solution & Example Answer:It is estimated that the 'Black Economy' costs the Irish Economy over €1 billion per month - Leaving Cert Economics - Question 2 - 2008
Step 1
Explain the term Black Economy
Answer
The term 'Black Economy' refers to all economic activities that go unrecorded in National Income Accounts. This includes transactions that are illegal or involve the underreporting of income to evade taxes. Such activities occur outside the formal economy, leading to a loss of tax revenue for the government and affecting overall economic statistics.
Step 2
State one method by which the government could discourage this activity
Answer
One effective method the government could use to discourage the Black Economy is to improve enforcement by revenue commissioners. This could involve simplifying the tax system, making it easier for individuals and businesses to comply with tax obligations. Enhanced audits and stricter penalties for tax evasion could also motivate compliance, thereby reducing the size of the Black Economy.