Australia’s black economy could be worth up to 30% of the nation’s gross domestic product according to research presented yesterday by RMIT.
Researchers have highlighted ”transfer pricing” – the manipulation of payments and invoices between Australian companies and related companies in tax havens to minimise tax – as a major drain on government revenue.
Sharif As-Saber, deputy head of research and innovation at RMIT University, told SmartCompany the black market was estimated at around 13 to 15% of the economy but that was just taking into account tax evasion.
“If you add illegal transactions like human trafficking and drugs it could be much higher than this,” says As-Saber.
“These kinds of illegal activities are actually rising which is not actually accounted for in the official estimates.”
The researchers found international business crimes today include a wide range of acts which go beyond the traditional corrupt practices such as piracy, bribing and transfer pricing and may include illegal sports betting, illegal ship breaking, high-sea piracy, human trafficking and money laundering.
They can also involve intellectual property theft, counterfeiting and illegal trading of drugs, arms, artefacts, live endangered animals and even human body parts.
As-Saber says the researchers are working towards a new definition of the black economy and what they term “black international business”.
“We would like to come up with a different perspective within international business because at the moment we just look at businesses that are legal and what we have found out is that there are businesses that are not legal entities and they are also involved in some kind of business across borders,” says As-Saber.
As-Saber cautions that all illicit businesses are not illegal, for example he describes the contracts that US companies got after the Iraq war as “all legal but probably illicit”.
As-Saber says it is difficult to point to one industry or sector which is particularly involved in black international business.
“All industries are involved in this kind of activity,” he says.
As-Saber says it is a “difficult question” to determine what should be done to combat the international black economy.
“Any government actions are reactionary in nature and given the sophistication of technology and all sorts of things, the criminals and gangs are advancing very fast,” says As-Saber.
“The response of governments and the international community is not as fast and they are always lagging behind and that is the problem.”
Cara Waters is the editor of SmartCompany. Cara was previously a senior reporter at the Financial Times website FT Adviser in London and has also worked for The Sunday Times.
