The black economy is worth €6 billion a year, the Small Firms Association warned yesterday, and it is at a point where it is having an impact on jobs in legitimate firms.

A J Noonan, chairman of the business group, said the scope, scale and extent of the black economy was causing serious problems for small business, by diverting spend away from legitimate businesses and undermining the ability of Government to collect taxes efficiently and effectively.

He said the scale of the black economy was only likely to increase in the current economic climate.

"Leakage to the black economy is now estimated to be as high as 14 per cent of GDP, or half a billion euro each month is generated that the taxman does not have access to," Mr Noonan said.

The group, which is part of Ibec, is calling for increased labour-market flexibility and business-friendly regulatory and tax regimes to deter more businesses from operating in the black economy.

The Small Firms Association is due to present its proposals to an Oireachtas committee tomorrow.