The shadow economy’s scope had been gradually decreasing until 2019, but the COVID-19 pandemic and the Ukraine war reversed this trend, pushing more people into informal economic activities. As a recent study by Kearney shows  Czech Republic is currently at eleventh position among 27 EU member states (the EU average stands at 17.9%).

Labor-intensive sectors such as manufacturing and construction contribute significantly to this underground economy, with 10-36% of activities going unreported. The hospitality and retail sectors show even higher rates, with up to 50% of income potentially undeclared. Small-scale service providers, including fitness trainers, nannies, gardeners, and house cleaners, form another significant segment of this hidden economy.

Digital payments are seen as a key tool in combating the shadow economy. According to Kearney’s director Jan Šarapatka, increasing digital payments by just one percent annually over the next five years could generate an additional five billion crowns in GDP and two billion in tax revenue.

Source: CzechDaily

Prepared by the team of foreign offices CzechTrade Osaka and Tokyo