S Korea's underground economy estimated at 17% GDP

The size of the so-called underground economy in South Korea has been shrinking steadily since the early 1990s due to increased transparency of financial transactions, a report said today.

According to the report by the Korea Institute of Public Finance, the size of the untaxed portion of the South Korean economy was estimated at 17.1% of the gross domestic product (GDP) in 2008, lower than 28.7% in the 1990s and 23.7% in the early 2000s. The report said a series of measures to boost transparency of financial transactions, including a scheme for real name-based financial transactions, helped to scale back the size of the underground economy in the country. The institute estimated that business entities in the country hid up to 29 trillion won (USD 25.9 billion) worth of revenues in 2008, equal to 3.1% of the country's overall economic size. "The government should redouble efforts to boost transparency by encouraging the use of credit cards," the report said. Also, more use of cash receipts will lead to an improvement in tax sources, which will in turn increase overall tax income, it added.