2. What is classed as illegal activity for the purpose of the national accounts?

An illegal activity is the production of or trade in goods and services where the sale, distribution and/or possession of those goods and services are prohibited by law. International directives dictate that activities that are prohibited but tolerated – such as the sale of cannabis – are also classed as illegal activities.

In the national accounts, these activities contribute to the Dutch economy if they fall within the ‘production limits’ of the Netherlands. This is only the case for transactions that involve the consent of both parties (buyer and seller), so activities such as theft or sending spam e-mails do not count towards economic production. However, the production of goods consumed by households themselves (such as agricultural production for personal use) do fall within the production limits. This includes the illegal production of cannabis for personal use.

Whether an activity is legal or illegal can of course vary from country to country. Whereas the Netherlands tolerates the sale of cannabis in coffeeshops and has legalised certain aspects of the prostitution sector, other countries take a different regulatory approach. These international differences in law are not the primary consideration for the purpose of the national accounts, as the accounts must anyway include all transactions that fall within the production limits. This publication treats the legal aspects of prostitution in the Netherlands as part of the illegal economy, even though in a statutory sense these activities are not illegal.

When describing the informal economy, the national accounts make a distinction between activities that are illegal and those that are undeclared. Illegal activities, such as trading in drugs, are in conflict with the law; undeclared activities are in general permitted by law, but the producer has unlawfully failed to report them to the Dutch Tax and Customs Administration. Although both illegal and undeclared activities are included in the national accounts, this article is only concerned with illegal activities.

Compared to the previous estimate in 2015, certain illegal activities are no longer part of the system of national accounts as various other EU countries only included the mandatory elements. To ensure that the Dutch figures are comparable to those from other countries, the Netherlands now also only provides estimates for the mandatory elements: the production of and trade in drugs; prostitution; and the illegal trade in tobacco. This and future revisions will no longer include the handling of stolen goods; the illegal copying of software, games, films and music; illegal temporary employment; or illegal gambling.