In France it is referred to as le travail noir. Other European countries prefer to call it the underground economy. In the United States it goes under a variety of names: the "hidden", "unmeasured," or "subterranean" economy; even, the "whispering" economy.
Call it what you will, its presence has become a dominant factor in today's Western societies as more people are declaring less of their income in tax returns. The Internal Revenue Service has estimated that $97 billion in revenues will go uncollected this year due to income-tax cheating, the bulk of this the result of unreported income from legal activities.
The Subterranean Economy (McGraw-Hill, 1982, $19.95, 187 pages) by Dan Bawly examines the whys, wheres and hows of today's practice of tax "avoision," a term aptly describing the intertwining of lawful tax avoidance and unlawful tax evasion.
Bawly, the executive partner of one of Israel's largest CPA firms, has not written a "how-to" book on cheating the IRS. He has, more importantly, put together an interesting study of the causes and effects of the subterranean economy which has taken root in the major democracies on both sides of the Atlantic. The villain, he claims, is big government and its relentless thirst for additional funds in the form of taxes. "Law-abiding, taxpaying citizens, avoiders and evaders alike, all have increasing doubts as to whether the various administrations are, in fact, spending 'their' incomes better and putting the funds to wiser use than they would themselves." Bawly attributes the continued growth of the underground economy to a lack of confidence in government.
The book details avoidance schemes practiced by the wealthy, who can afford the professional fees involved in finding and taking advantage of various tax shelters and havens. Tax evasion, more common among the masses, ranges from moonlighting and the use of the barter system to the unreported income gained from such criminal activities as prostitution and illegal drug trade. Bawly explains how multinational conglomerates and the extraterritorial money market (Euromarket) have contributed to the growth of the subterranean economy by creating new possibilities of developing sources of undeclared income. And, closer to home, he devotes a chapter to the specific study of the unmeasured economy in the United States, claiming that the "total productivity of the subterranean economy of the U. S. is larger than the gross national product of Canada or California."
It has only been in the last four or five years that the extent of the underground economy has been seriously examined. What worries Bawly is the fact that "political establishments do not seem to have yet fully realized the debilitating effects of the subterranean economy." And, he feels, until they do, and unless government spending becomes more efficient than it is today, the subterranean economy will continue to thrive.