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on Informal and Underground Economics |
| By: | Soldatos, Gerasimos T. |
| Abstract: | Contrary to what the literature on the linkage between debt accumulation and hidden economy suggests, this paper advocates that the two relationships, tax-hidden economy size and inflation-hidden economy size, have to be inverse because it is the relative, not the absolute hidden economy size that matters, and it is this that should be the yardstick for empirical work on the subject. It is also this that should be the yardstick for policymaking against debt accumulation by following the anti-austerity policy recipe that debt manipulation should be relying more on money than on taxation, that as soon as more money facilitates hidden activities, tax design should be counteracting this trend too, and that the Laffer curve should be peaking at an average tax rate which is less than one. This rule derives as a matter of preserving such official-cum-hidden economy technical-cum-allocative efficiency over the course of the business cycle that keeps the overall economy always in general equilibrium. |
| Keywords: | Public debt, Non-observed/Hidden sector, Taxation, Income elasticity of money demand, Structural efficiency |
| JEL: | E26 E32 E61 H63 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:69911&r=iue |
| By: | Antonescu, Mihail; Antonescu, Ligia |
| Abstract: | The excessive increase of the tax burden, the existance of a bad legislation, the lack of effective fiscal control and insufficient education of taxpayers are the main causes of tax evasion. While impossible to determine the exact size of the tax evasion, approximate measures and statistical data are used for its measurement. This is necessary to determine the effectiveness of prevention and combating evasion methods but also to estimate the negative consequences. |
| Keywords: | Tax evasion, control of fiscal evasion |
| JEL: | H26 |
| Date: | 2016–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:69948&r=iue |
| By: | Brockmeyer,Anne; Hernandez,Marco |
| Abstract: | This paper studies tax withholding on business sales, a widely used compliance mechanism which is largely ignored by public finance theory. The study introduces a withholding scheme, whereby the payer in a transaction collects tax from the payee, in a standard evasion model. If the taxpayer can fully reclaim the tax withheld, withholding is irrelevant to her evasion decision. If reclaim is costly, however, withholding establishes a compliance default. To show this empirically, the analysis exploits a ten-year panel of registration, income tax and sales tax records from 400,000 firms in Costa Rica, and over 20 million third-party information and withholding reports. The paper first documents the anatomy of compliance, providing novel measures of compliance gaps on the extensive, intensive and payment margins. It then shows that interventions leveraging the existing third-party information reduce these compliance gaps only marginally. Coverage by a withholding scheme, in contrast, is correlated with higher reported taxable income both across firms and within firms across time. Quasi-experimental estimations show that a doubling of the withholding rate leads to a 40 percent increase in tax payment among treated firms and a 10 percent increase in aggregate revenue. The mechanisms are incomplete reclaim of the tax withheld and reduced misreporting. |
| Keywords: | Debt Markets,Tax Law,Taxation&Subsidies,Emerging Markets,Transport Economics Policy&Planning |
| Date: | 2016–03–14 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:7600&r=iue |
| By: | Waqas Ahmed (State Bank of Pakistan); Sajawal Khan (State Bank of Pakistan); Muhammad Rehman (State Bank of Pakistan) |
| Abstract: | We analyze optimality of pro-cyclical monetary policy in the presence of informal sector and firm level constraint. Our findings suggest that in case of export demand shock pro-cyclical monetary policy suits only when shock is severe and domestic firms have high leverage ratio. However, the conventional monetary policy helps cushioning the loss in output when the size of informal sector is significantly large. Furthermore, fixing exchange rate is better policy option if objective is to keep domestic employment or consumption from falling (when negative shock hits the economy). We cannot find any disproportionate impact of monetary policy on informal sector. This may be due to static nature of the model and it might be possible that dynamics of responses of the two sectors to shocks differ significantly. |
| Keywords: | Informal sector, credit constraint, exchange rate and monetary policy |
| JEL: | F0 F4 O17 O23 E52 |
| URL: | http://d.repec.org/n?u=RePEc:sbp:wpaper:72&r=iue |
| By: | Voeten, Jaap (Tilburg University, School of Economics and Management) |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiutis:fead4414-ba15-47cc-9a5d-3eb4d7cb1a22&r=iue |
| By: | Krasniqi, Armand |
| Abstract: | In terms of modern societies, the definition of the notion of certain forms of informal activities in the economy has evolved dynamically. In general, the definition used for the informal economy by lawyers and economists, involves economic transactions or operations in which state institutions not only have no control over them, but they also fail to take action to stop them. Precisely in this form, informality has become one of the most discussed problems in Kosovo politics. Reducing it is vital for the national economy to improve. However, it seems that the passive path which the relevant government institutions are taking in combating this negative phenomenon, not only is not right and adequate, but, above all, presents factors that are of high risk and multidimensional. Unfortunately, the relatively new local banking system, especially in commercial banks, has gradually become a serious stimulus segment of this informal activity. Among other things, the commercial banks, upon establishing credit relations with certain business entities, mainly during the provision of loans and being fully aware, base their credit risk analysis on financial and accounting records that are not official, i.e. are not identical to those provided to the Tax Administration. Now is the last moment that the government must focus its efforts on limiting and reducing the informal economy in the country. Enhancing the role of the Tax Administration and the Financial Intelligence Unit for the purpose of increasing their operational efficiency bears no alternative. |
| Keywords: | economy, informality, law, tax, bank |
| JEL: | K2 |
| Date: | 2016–01–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:69716&r=iue |
| By: | J. Ignacio García Pérez |
| Abstract: | En el presente trabajo se analizan los efectos de la última reforma laboral sobre el empleo y sobre el grado de dualidad del mercado de trabajo español. El trabajo replica un estudio de la OCDE realizado pocos meses después de la reforma, confirmando sus resultados positivos con una muestra sustancialmente más larga, e introduce algunas extensiones que corroboran la robustez de los resultados y permiten afinar las estimaciones del impacto de la reforma dependiendo del tamaño de la empresa y de otras variables como la duración en el desempleo, la edad y el género de los trabajadores. El impacto de la reforma se cuantifica mediante la estimación con datos individuales de la Muestra Continua de Vidas Laborales de modelos estadísticos que relacionan las tasas de salida del desempleo al empleo y del empleo al desempleo con las características personales y el historial de cada trabajador, con indicadores de la situación macroeconómica general y del estado del mercado laboral provincial y con una variable dicotómica que distingue entre antes y después de la reforma. Los resultados del estudio sugieren que la reforma ha tenido un efecto positivo sobre el empleo por dos vías: aumentando la probabilidad de salir del desempleo hacia un empleo indefinido y reduciendo la probabilidad de despido para los trabajadores con un contrato temporal, seguramente porque las empresas están haciendo uso de las nuevas medidas de flexibilidad interna puestas a su disposición de cara a acomodar sus necesidades de ajuste. |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:fda:fdapop:2016-06&r=iue |