High Taxes, Regulations Drive Europeans to the Underground Economy

Which then causes revenues to plummet

Punitive tax regimes, increased labor market regulation and a growing lack of trust in governments are causing many Europeans to abandon formal employment and enter into the murky, illicit world of shadow economies worth billions of dollars, according to a pan-European study published on Tuesday.

Research commissioned by the U.K.-based think tank, the Institute of Economic Affairs (IEA), revealed on Tuesday that Europe's shadow economy employs up to 30 million people across the European Union and that illicit economic activity constitutes up to 20 percent of national income in countries such as Spain, Italy and Greece.

In the U.K., the shadow economy constitutes approximately 10 percent of gross domestic product (GDP), about 14 percent in Nordic countries and between 20 to 30 percent in many southern European countries, according to the IEA.