"Some national estimates show that illegal work accounts for as much as 17 percent of the national GDP."

The country? Germany.

According to Hermann the German, the reason for this large, illegal economy is the taxes and large social services contributions those legitimately employed by the government--what's known as abglaben--companies must pay. Companies prefer paying illegals under the table and not paying these costs.

Writes Hermann:

Somebody has to do something about this, right? Right, it’s only been a problem for a few years...- like sixteen or seventeen, ever since the fall of the Berlin Wall at least. No government ever really lowers taxes or Abgaben once they’ve been introduced, however, so the city of Berlin is taking a big plunge and is going to überwinde (overcome) its fear of technology and introduce chip cards next year.

Every worker will be required to have a chip which contains tax and social security information. In addition, employers in the construction sector will have to account for all the cash they pay individuals who work for them.

The idea is great in theory. But, according to Hermann, this technological solution probably won't work:

...I’m sure that the counter-scams have already been worked out in detail by those who plan to keep dodging the law. Maybe the real solution is in lowering taxes and Abgaben after all? Nah.

Read the whole thing and follow Hermann's links.