The small business lobby group, Isme, has called on the Government to tackle the illegal activities of rogue operators, racketeers and others who participate in the black economy.

The organisation estimates the size of the black economy at over €1 billion per month.

Isme chief executive Mark Fielding said that core black economy activities are estimated to account for up to 11 per cent of gross national product (GNP), which would equate to over €13 billion.

The amount of unpaid taxes alone is estimated at €2.7 billion, which could be used to fund infrastructure and other state projects, he said. There is also the significant cost of increased expenditure on social welfare and the threat posed to the jobs of those employed in legitimate businesses.

Mr Fielding confirmed Organisation for Economic Co-operation and Development (OECD) figures that show an increase in the Irish shadow economy of 43 per cent in the 10 years to 2002.

He estimated that the number of companies operating in the black economy would continue to increase, mainly as a consequence of the high costs associated with doing business, the high rates of VAT and the low rate of detection in Ireland.

Sectors that are particularly affected include the construction industry, the childcare sector and the private security industry, Mr Fielding said.

Legitimate companies in these sectors not only have the difficulty of recruiting potential employees, but also have the more immediate threat of competition from unscrupulous businesses operating in the black economy who undercut the cost of providing the service.

The impact is to rob business from genuine compliant companies, he said.

Mr Fielding blamed rising production costs in recent years for forcing some companies and activities into the black economy.

"It is no coincidence that, as business costs escalate, many firms are being forced into the shadow economy simply to survive" he said.