Taiwan's Grey-market Economy Estimated at 28% of GDP in 2012

Taiwan's grey market economy is estimated to have increased to reach 28% of overall GDP in 2012, being a NT$3-4 trillion sector that is neither taxed nor regulated by government, according to the latest study by a joint research group from the National Taiwan University and National Cheng Kung University (NCKU).

The study finds that, after a steady downturn during 1961-2003, Taiwan's grey market has grown continually, to roughly equal a quarter of the island's overall GDP on average during 2003-2012, which is likely due to the aftermath of the global financial meltdown and rising popularization of e-commerce among other factors.

Ho Chih-Chin, vice president of NCKU, says that of advanced global economies, grey market activities generally account for only about 10% of GDP, compared to as high as 30~40% in emerging economies as Eastern Europe, the Philippines and Indonesia.

Ho says that many factors contribute to development of grey market economy, including wealth gap, growing contribution of service sectors to overall GPD and rising income tax; while increase in GDP, number of banks, monthly work hours, labor participation can help to alleviate such trend.

Size of grey market economy is very difficult to measure accurately, but can be estimated by tallying revenue of all businesses that take in mostly cash as small hotels, F&B operators, other small businesses that can easily evade tax, according to Ho. (SC)