1. Introduction

Every economy encompasses not just legal activities, but also illegal ones, such as the trade in drugs and the provision of unlicensed prostitution. The European Union’s (EU) directives state that, as of September 2014, the national accounts that describe the national economy must also include an estimate of these illegal activities.

It is much more difficult to provide reliable estimates of illegal activities, as the ‘hidden’ nature of these activities means that accurate information about them is hard to find. Whereas CBS can usually generate estimates using a range of direct sources such as registers and surveys, no such sources are available for illegal activities and we must instead rely on indirect information. This information is drawn from sources such as reports issued by the Netherlands Police and other bodies, information about goods confiscated by Customs and reports produced by research organisations. CBS also contacted several organisations to obtain additional background information for this research.

On 23 May 2024, CBS published the initial outcomes of the revision of the national accounts for the 2021 reporting year, including the revision of the illegal sector of the Dutch economy. Given the wide margin of error surrounding these estimates, CBS only publishes revised figures on the scale of the illegal economy in the Netherlands once every five years. This article discusses how CBS arrived at its estimate of the illegal economy.

The article begins by providing a definition of illegal activities in the national accounts and the extent of those activities. The method used to generate the estimate about cocaine is then described in detail, and finally the article gives a brief description of how estimates are produced for other illegal activities. We also highlight the difference between income generated within the Dutch national borders and income that can ultimately be allocated to Dutch residents. This disparity is especially significant in the case of the trade in cocaine.

CBS generated the estimate contained in today’s publication based on information from various sources that was available at the time of publication, as well as interviews with experts. Under European agreements, all other EU countries will also have to revise their estimates of the illegal economy in the near future. However, member states are not required to publish these data in full. The EU will conduct a quality control in the coming years, using GNI verification to assess the methodology and sources used for the Dutch estimates both in isolation and in comparison with other EU countries.