Russia’s shadow economy accounts for 15-20 percent of GDP, Finance Minister says

YEREVAN, June 21. / ARKA /. Russia’s shadow economy accounts for some 15-20 percent of the country’s gross domestic product (GDP), the finance minister said Thursday. With a GDP of about 60 trillion rubles ($1.8 trillion), that means at least 9 trillion rubles ($250 billion) is generated by opaque transactions, Finance Minister Anton Siluanov said in comments aired on Ekho Moskvy (Echo of Moscow) radio.

Based on an aggregate tax burden of 35 percent, the shadow economy accounts for at least $90 billion in unpaid taxes every year, he said.

Earlier Russian Economic Development Minister Andrei Belousov said if the small businesses were brought to the net their share in the GDP would reach 40-50% compared to the current 19%. He said about 18 million people work in the informal sector.

Meanwhile, analysts from American Global Financial Integrity (GFI) research center believe that 46% of Russia’s economy is in shadow. From 1994 to 2011 some $211.5 billion were illegally taken out of the country as bribes, untaxed revenue and the money earned from the sale of drugs, arms and trafficking in human beings, they said.

GFI head Raymond Baker said hundreds of billions of US dollars that could have been invested in the Russian health, education and infrastructure were lost. At the same time, more than half a trillion dollars were invested in Russia's shadow economy, fueling crime and corruption.

According to the World Bank, Russia's shadow economy is 3.5 times larger than that of other countries in the G-8. The amounts of the shadow economy and illegal money flows have been growing over the past 18 years, fueled by the low efficiency of political governance and widespread tax evasion. This undermines the economic and political stability of the country, according to GFI experts. -0-