Underground economy

Definition

The underground economy encompasses all market-based legal production of goods and services that are deliberately concealed from public authorities to avoid payment of income, value added or other taxes, to avoid payment of social security contributions, having to meet certain legal labor market standards, such as minimum wages, maximum working hours, safety standards, etc., and complying with administrative procedures. It includes both criminal activities and legitimate business operations that are not reported to avoid regulation or taxation.

Related terms

Tax Evasion: The illegal practice of not paying taxes by individuals or businesses by concealing income or information from tax authorities.

Informal Sector: Part of an economy that is not taxed, monitored by any form of government, or included in any gross national product (GNP), unlike the formal economy.

Money Laundering: The process of making large amounts of money generated by a criminal activity appear to be earned legally