Turkey worst in OECD for unregistered economy: Study

Şebnem Turhan – ISTANBUL

The share of the unregistered economy in Turkey is bigger than any other Organization for Economic Co-operation and Development (OECD) member state, according to a new study. 

The shadow economy's ratio to the Turkish cross domestic product is at 28.72 percent, said the study’s author Ceyhun Elgin, from the Economy Department of Istanbul’s Bosphorus University. 

Estonia and Mexico closely follow Turkey at 28.70 percent and 28.1 percent respectively. 

The U.S. has the best record with a mere 7.95 percent of its economy being unregistered, followed by Switzerland with 8.07 percent. 

Austria, Luxembourg and Japan are also in the top five OECD countries in the category. Italy and Greece are two other European countries struggling against the unregistered economy. 

Elgin’s study reports that the world average of the share of the shadow economy among 161 countries is 22 percent, meaning that Turkey is worse than the global average.

Turkey has shown no improvement in reducing the share of the unregistered economy over the last decade, according to the study, which predicts that the country will remain above the average by 2023, the 100th anniversary of the founding of the Turkish Republic. Elgin believes that the share of Turkey’s unrecorded economy rate will be 24 percent in 2023.

The report also reveals Turkey’s performance since the 1950s. In the 1950s the rate was 50 percent, plummeting to 30 percent by the end of the 1990s. 

However, since the 1990s the problem has fluctuated between 27 and 29 percent. 

Presenting his report, Elgin stressed that the registered economy is not only caused by tax breaks or unregistered employment, adding that online shopping errors, illegal trade, and unpaid overtime wages also contribute to the high numbers. 

Avoiding official registration also helps companies cut down expenses, he added.

Elgin says four indicators in particular should be improved to cut down the shadow economy. 

The first is securing solid growth in the recorded economy, which is one key precondition as it promotes new business fields and more registered employment. Also, political stability and low inflation rates help to increase predictability and reduce the shadow economy, while a concerted effort to tackle corruption would also contribute to a fall in the share of the unregistered economy, according to Elgin.