French black economy thriving

Tuesday, January 28 07:44:19

French handyman Bruno works full-time doing repair work on homes around Paris. But he says the real reward comes after all paperwork has been signed and customers ask for more work - off the books.

"The client and I are in the same position: we both need to save money, so cash works for everyone," said Bruno, 27, who asked not to be identified because of the tax-dodging that is helping to swell his monthly wages by 25 to 50 percent.

Working for cash in hand is commonplace in many countries, including some of France's euro zone neighbours.

Now the French are starting to catch up, undermining President Francois Hollande's efforts to boost official employment numbers and threatening the tax receipts he needs to bring the public deficit within European Union limits.

A cultural preference for using cheques over cash and France's highly-developed tax collection system, employing 115,000 staff, have kept its undeclared economy less developed than those of some of its neighbours.

But rises in value-added taxes and the scrapping of subsidies for services ranging from baby-sitting to gardening have spurred the first expansion in the 'shadow' part of France's economy for more than a decade.

Friedrich Schneider, shadow economy specialist at Austria's Linz University, said such activity in France last year amounted to a further 10.2 percent of output - compared with 21 percent in Italy and 19 percent in Spain.

Now Schneider, one of the world's most widely-cited experts on shadow economies, forecasts the French figure will rise to 11.4 percent in 2014. He gauges economies' "invisible" output using clues such as total cash demand.

In a French survey by the Markit Audit pollster in November, one in three people admitted to having worked off the books - against just 13 percent in 2008.

See the original post:
French black economy thriving