[Kegiatan ekonomi bawah tanah adalah masalah umum di setiap negara terlepas dari tingkat perkembangan ekonomi dari suatu negara, termasuk Indonesia. Kegiatan ini tidak dihitung dalam perhitungan PDB. Dengan demikian, hasil perhitungan PDB tersebut akan membuat bias kebijakan yang diambil oleh pemerintah. Tujuan dari penelitian ini adalah untuk menganalisis kondisi ekonomi bawah tanah di Indonesia, karakteristiknya dan faktor penyebabnya. Penelitian ini juga akanmenguji hubungan antara ekonomi bawah tanah dan pertumbuhan ekonomi Indonesia serta pendapatan pemerintah dari sektor pajak. Hasil analisis menunjukkan bahwa ukuran ekonomi bawah tanah di Indonesia untuk periode 1999–2007 masih relatif tinggi yaitu sekitar 18% - 21% dari PDB. Akibatnya, kondisi ini akan memberikan dampak negatif pada pertumbuhan ekonomi dan juga mengurangi pendapatan pemerintah, terutama dari sektor perpajakan, hal ini akan membatasi kemampuan pemerintah dalam penyediaan barang publik kepadamasyarakat. Ada beberapa cara yang dapat ditempuh oleh pemerintah dalam mengurangi ekonomi bawah tanah, tetapi pemberantasn tingkat korupsi dan peningkatan kualitas pemerintah dalam rangka meningkatkan kepercayaan masyarakat adalah langkah utama yang perlu diambil oleh pemerintah Indonesia;Underground economic activities are a common problem in every country regardless of the level of economic development, including Indonesia. These activities are not counted in GDP measurement; thus, they will skew governmentpolicy decisions. The aim of this study is to examine the current condition of the underground economy in Indonesia, its characteristics, and the causes of its increasing growth. This study will also examine the relationship among the underground economy, Indonesian economic growth, and government tax revenue. The findings show that the size of the underground economy between 1999 and2007 is relatively high at approximately 18% to 21% of GDP. Consequently, the underground economy has a negative impact on economic growth and also reduce government revenue, primarily tax revenue, thereby limiting the government’s ability to provide goods and services. Although, there are several ways to reduce the underground economy, reducing the level of corruption and improving governance in order to increase social trust is the most important action that can tobe taken by the Indonesian government.;Underground economic activities are a common problem in every countryregardless of the level of economic development, including Indonesia. Theseactivities are not counted in GDP measurement; thus, they will skew governmentpolicy decisions. The aim of this study is to examine the current condition of theunderground economy in Indonesia, its characteristics, and the causes of itsincreasing growth. This study will also examine the relationship among theunderground economy, Indonesian economic growth, and government tax revenue.The findings show that the size of the underground economy between 1999 and2007 is relatively high at approximately 18% to 21% of GDP. Consequently, theunderground economy has a negative impact on economic growth and also reducegovernment revenue, primarily tax revenue, thereby limiting the government’sability to provide goods and services. Although, there are several ways to reducethe underground economy, reducing the level of corruption and improvinggovernance in order to increase social trust is the most important action that can tobe taken by the Indonesian government, Underground economic activities are a common problem in every countryregardless of the level of economic development, including Indonesia. Theseactivities are not counted in GDP measurement; thus, they will skew governmentpolicy decisions. The aim of this study is to examine the current condition of theunderground economy in Indonesia, its characteristics, and the causes of itsincreasing growth. This study will also examine the relationship among theunderground economy, Indonesian economic growth, and government tax revenue.The findings show that the size of the underground economy between 1999 and2007 is relatively high at approximately 18% to 21% of GDP. Consequently, theunderground economy has a negative impact on economic growth and also reducegovernment revenue, primarily tax revenue, thereby limiting the government’sability to provide goods and services. Although, there are several ways to reducethe underground economy, reducing the level of corruption and improvinggovernance in order to increase social trust is the most important action that can tobe taken by the Indonesian government]