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

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.