IDEAS home Printed from
   My bibliography  Save this paper

Illicit Financial Flows: concepts and first macro estimates for Belgium and its 18 preferred partner countries


  • Jozef Pacolet

    () (HIVA, KU Leuven)

  • Joris Vanormelingen

    () (HIVA, KU Leuven)


There is a growing awareness that illicit financial flows and the shadow economy might have a substantial impact on the financing of development. This paper provides a disentanglement of the definitions, sources and causes and measurement methodologies used and a first quantitative estimate for the 18 partner countries for development of Belgium. An overview of methodologies for defining the shadow economy, the informal economy, illicit financial flows and capital export has been provided, and based on those secondary sources a first macro estimate of their size has been provided for the 18 preferred partner countries for Belgian governmental development cooperation, together with some core macro-economic indicators. As a benchmark similar information is provided for the ‘Low Countries’ or Benelux. All those studies on the underground economy are in search of a ‘dark figure’ that risks to become, as some scholars call it, ‘facts by repetition’. More than 2 trillion euro undeclared economy in the EU, 1 trillion euro missed tax revenue in the same EU, they became officially quoted figures but they go back to the same, sometimes criticised source of information. Almost 1 trillion USD illicit financial flows worldwide is a similar fact that is cited over and over again. But it remains the best practical starting point to look for further evidence or understanding of those phenomena in the 18 partner countries. 46 billion USD illicit financial flows or 3.5% of their GDP are estimated for the 18 partner countries of Belgium (around 2012). 261 billion USD estimated underground economy or some 31.6% of GDP of those 18 countries (around 2007). Ten times more, as share of GDP. Both figures reveal the massive potential importance for financing of development.

Suggested Citation

  • Jozef Pacolet & Joris Vanormelingen, 2015. "Illicit Financial Flows: concepts and first macro estimates for Belgium and its 18 preferred partner countries," BeFinD Working Papers 0110, University of Namur, Department of Economics.
  • Handle: RePEc:nam:befdwp:0110

    Download full text from publisher

    File URL:
    File Function: First version, 2015
    Download Restriction: no

    References listed on IDEAS

    1. Cooray, Arusha & Dzhumashev, Ratbek & Schneider, Friedrich, 2017. "How Does Corruption Affect Public Debt? An Empirical Analysis," World Development, Elsevier, vol. 90(C), pages 115-127.
    2. Christopher D. Carroll & Jiri Slacalek & Kiichi Tokuoka, 2014. "The Distribution of Wealth and the MPC: Implications of New European Data," American Economic Review, American Economic Association, vol. 104(5), pages 107-111, May.
    3. Brigitte Unger, 2007. "The Scale and Impacts of Money Laundering," Books, Edward Elgar Publishing, number 12690.
    4. Schneider, Friedrich, 2012. "The Shadow Economy and Work in the Shadow: What Do We (Not) Know?," IZA Discussion Papers 6423, Institute for the Study of Labor (IZA).
    5. Joshi, Anuradha & Prichard, Wilson & Heady, Christopher, 2012. "Taxing the Informal Economy: Challenges, Possibilities and Remaining Questions," Working Papers 2309, Institute of Development Studies, International Centre for Tax and Development.
    6. Tanzi, Vito, 1999. "Uses and Abuses of Estimates of the Underground Economy," Economic Journal, Royal Economic Society, vol. 109(456), pages 338-347, June.
    7. Prichard, Wilson & Cobham, Alex & Goodall, Andrew, 2014. "The ICTD Government Revenue Dataset," Working Papers 10250, Institute of Development Studies, International Centre for Tax and Development.
    8. McNabb, Kyle & LeMay-Boucher, Philippe, 2014. "Tax Structures, Economic Growth and Development," Working Papers 10253, Institute of Development Studies, International Centre for Tax and Development.
    9. Brugt Kazemier & Arjan Bruil & Annemieke van de Steeg & Marieke Rensman, 2013. "The Contribution of Illegal Activities to National Income in the Netherlands," Public Finance Review, , vol. 41(5), pages 544-577, September.
    10. Derek Blades, 2011. "Estimating Value Added Of Illegal Production In The Western Balkans," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 57(1), pages 183-195, March.
    11. J. K. Boyce & L. Ndikumana, 2001. "Is Africa a Net Creditor? New Estimates of Capital Flight from Severely Indebted Sub-Saharan African Countries, 1970-96," Journal of Development Studies, Taylor & Francis Journals, vol. 38(2), pages 27-56.
    12. S. Abbas & Alexander Klemm, 2013. "A partial race to the bottom: corporate tax developments in emerging and developing economies," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 20(4), pages 596-617, August.
    13. Friedrich Schneider & Andreas Buehn & Claudio E. Montenegro, 2011. "Shadow Economies All Over the World: New Estimates for 162 Countries from 1999 to 2007," Chapters,in: Handbook on the Shadow Economy, chapter 1 Edward Elgar Publishing.
    14. Alex Cobham (QEH), "undated". "Tax Evasion, Tax Avoidance and Development Finance," QEH Working Papers qehwps129, Queen Elizabeth House, University of Oxford.
    15. Hana Polackova Brixi & Christian M.A. Valenduc & Zhicheng Li Swift, 2004. "Tax Expenditures--Shedding Light on Government Spending through the Tax System : Lessons from Developed and Transition Economies," World Bank Publications, The World Bank, number 15067.
    16. James Boyce & Léonce Ndikumana, 2008. "New Estimates of Capital Flight from Sub-Saharan African Countries: Linkages with External Borrowing and Policy Options," Working Papers wp166, Political Economy Research Institute, University of Massachusetts at Amherst.
    17. Mario Mansour & Michael Keen, 2009. "Revenue Mobilization in Sub-Saharan Africa; Challenges from Globalization," IMF Working Papers 09/157, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    More about this item


    illicit financial flows; financing for development;

    JEL classification:

    • F39 - International Economics - - International Finance - - - Other

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nam:befdwp:0110. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marie-Helene Mathieu). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.