The Irish Small and Medium Enterprises Association estimates the state could be losing out on up to €5 billion in revenue lost due to the existence of a growing 'black economy'.
ISME believes activities such as smuggling and non-reporting of income by both firms and individuals to the revenue are on the rise.
The growth of illicit activity and a thriving 'nixer culture' are the key contributors to a black economy which ISME says accounts for up to 16% of the country's entire economic output.
It estimates up to €5 billion in tax revenue is lost to the Exchequer and recommends stiffer penalties, more co-operation between Government agencies to stop cross border smuggling and a reform of the tax and welfare systems to encourage legitimate employment over what it calls 'jobs for cash'.
'As the country remains in recession there has been a noticeable increase in black economy activities, with catastrophic consequences for those legitimate companies. Consequently, hundreds of businesses are being forced to close with thousands of jobs lost in the process,' commented ISME's chief executive Mark Fielding.
'The level of black or unobserved economy activities depends on the incentives and opportunities to cheat. It is vital that the Government reduce the incentives to take business underground, by reviewing tax rates and public utility costs, by deregulating the labour market, addressing social welfare fraud and cutting red tape and a total revamp of the department of Social Protection,' he added.
Separately this morning two other business lobby groups have brighter news to report. Just over one in five employers are planning to hire new staff in the coming three months, according to a new survey from the Irish Business and Employers Confederation.
The survey indicates the proportion of companies prepared to take on new employees has doubled compared to the same three month period last year.
Another survey, from IBEC's sister organisation the Small Firms Association, finds the number of smaller companies prepared to hire new staff is higher than the number anticipating redundancies for the first time since 2009.
