High Taxes, Red Tape Fuel Large Israeli Shadow Economy

Stop mugging your people and they may stop hiding

Amounting to an estimated NIS 185 billion, Israel's shadow economy will reach 18.9 percent of its GDP in 2013, a study by credit card company Visa revealed on Tuesday.

The study defined the shadow economy as unreported or under-reported transactions in the legal economy, excluding illicit activities such as drug-dealing.

The 18.9% figure puts Israel on par with the European Union as a whole, but somewhat ahead of the OECD average, which stood at just 15.3%. …

According to the report, the drivers of the shadow economy in Israel include relatively high tax levels, an unevenly distributed tax burden, high amounts of bureaucratic redtape and insufficient financial inclusion of minorities, such as Israeli Arabs and Orthodox Jews.