Mr. A. J. Noonan:

The SFA is urging the Government to become committed to a solution to the growing problems that the black economy creates for the small business sector. Due to the scale of the drain on the economy, more focused attempts to tackle the problem are overdue and, given that sometimes controversial measures are necessary, a European initiative may be required. We must also ensure that honest taxpayers and businesses do not suffer additional tax increases to make up for revenue losses incurred due to fraudsters and evaders.

There needs to be greater awareness among consumers of the consequences of purchasing counterfeit and smuggled goods and paying cash to illegitimate businesses. This could be achieved through an awareness campaign highlighting the anti-social nature of the informal economy, combined with tougher enforcement. We will keep coming back to the theme of tougher enforcement.

There is a strong business case for resources to be deployed to enhance enforcement action. While stern penalties apply, a large volume of illegal activity goes undetected. As Ms Mcnally previously testified, the courts rarely apply the maximum fines or custodial sentences. If individuals in receipt of social protection benefits are convicted of illegal activity, that is, tax, customs or excise evasion, these benefits should be reduced by the value of the loss incurred by the State until the amount owed is reimbursed to it.

An evaluation of factors influencing taxpayers' attitudes towards the informal economy should be undertaken. Reports on the hidden economy indicate that when an economy has a favourable tax regime, it is more beneficial for the Exchequer. When taxes and business costs increase, there is little incentive to work; there is a greater incentive to find options to be non-compliant. A reduction in the cost of operating in the formal economy could bring some of the illegal transactions to the formal sector. While steps to address the black economy have been taken by Revenue and Departments, a review of the resources engaged in tackling the informal economy and increased expenditure on training for those engaged in challenging the informal economy are required. As we called for a social welfare amnesty about three years ago, I completely concur with Mr. Fielding. It is vital that people are given a chance to make a fresh start, but if they do not do so, the penalties should be severe.

While the State and small businesses are spending billions of euro on preventive actions relating to the black economy and business crime, the incidence, extent and scope of costs associated with the informal economy are increasing. This alone reflects the societal changes taking place and why it is so important the manner in which we deal with people operating in the black economy must change; otherwise, our society, the State and businesses are in serious danger.

I thank the committee for its time and invite questions from it.