Post-Soviet corruption and a lot of natural resources have led to an enormous amount of unrecorded and untaxed economic activity in Russia.
Just how large the underground economy is was identified in a report by Global Financial Integrity (GFI).
As you can see in the chart below, Russia's underground economy blows away other major countries in terms of the size of the underground economy relative to GDP. Even Italy, where the Mafia became the largest bank in January 2012, doesn't come close to the shadiness-relative-to-GDP of the Kremlin.
A closer look at Russia reveals that its underground economy — fed largely by oil and gas kickbacks — keeps growing, topping out at 19 trillion rubles ($630 billion) in 2011:
The report concludes that the "massive illicit flows from Russia and how they both drive and are driven by its huge underground economy are symptomatic of weak overall governance," adding that implementing the recommended policy measures should be " the highest priority by the Russian Government."
Given Russia's glut of natural resources and how much President Vladimir Putin has benefitted from the current system, it doesn't seem likely that curbing the underground economy will become Moscow's highest priority anytime soon.
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