nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2020‒04‒06
seven papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Fiscal Consolidations and Informality in Latin America and the Caribbean By Thibault Lemaire
  2. Informal employment trends in the Indian economy persistent informality, but growing positive development By Mehrotra, Santosh K.
  3. Measuring the uncertainty of shadow economy estimates using Bayesian and frequentist model averaging By Piotr Dybka; Bartosz OlesiÅ„ski; Marek Rozkrut; Andrzej Torój
  4. How do Taxpayers Respond to Public Disclosure and Social Recognition Programs? Evidence from Pakistan By Joel Slemrod; Obeid Ur Rehman; Mazhar Waseem
  5. The Impact of Plastic Money Use on VAT Compliance: Evidence from EU Countries By Amakoe D. Alognon; Antonios M. Koumpias; Jorge Martinez-Vazquez
  6. Study and Reports on the VAT Gap in the EU-28 Member States: 2019 Final Report By Grzegorz Poniatowski; Mikhail Bonch-Osmolovskiy; José María Durán-Cabré; Alejandro Esteller-Moré; Adam Œmietanka
  7. Fiscalité et commerce international : quels enjeux pour l’immigration clandestine ? By Fabio Mariani; Luca Pensieroso

  1. By: Thibault Lemaire (Centre d'Economie de la Sorbonne - Université Paris 1 panthéon-Sorbonne, Banque de France;
    Abstract: The transmission mechanisms of fiscal policy are significantly affected by informality in the labour market. Extending a narrative database of fiscal consolidations in 14 countries from Latin America and the Caribbean between 1989 and 2016 in order to account for heterogeneity in terms of commitment to the reforms, I show that tax-based and spending-based multipliers are both recessionary and do not significantly differ one from another in this region. Furthermore, these multipliers decline in absolute value as the level of labour informality increases in the economy, although evidences are less robust for spending-based consolidations. An analysis of the effects of tax-based consolidations on private demand suggests that labour market informality constitutes a short-term social buffer that attenuates the contractionary effects of this type of policy by increasing investment opportunities through tax evasion and entrepreneurial alternatives to unemployment for dismissed workers
    Keywords: Fiscal consolidation; taxation; informality; emerging market economies
    JEL: E62 E26 E32 H5 H6
    Date: 2020–01
  2. By: Mehrotra, Santosh K.
    Keywords: informal employment, economic growth
    Date: 2019
  3. By: Piotr Dybka; Bartosz OlesiÅ„ski; Marek Rozkrut; Andrzej Torój
    Abstract: Economic literature provides little discussion on the uncertainty around the macroeconometric shadow economy estimates. We fill this gap by deriving the measurement error of the shadow economy estimates stemming from the model uncertainty by using frequentist and Bayesian model averaging techniques. This allows us to make useful insights into the optimal selection of regressors within the Currency Demand Analysis (CDA) framework, basing on the marginal probabilities that the selected variables are included in the ''true'' model. Hence, we provide the CDA researchers with an additional guidance with respect to the selection of shadow economy determinants that makes CDA-based shadow economy measurements less arbitrary. Our results show that the selection of regressors can have a material and highly country-specific impact on the estimated level of the shadow economy. In consequence, one cannot attribute the same level of uncertainty to every country across the panel. We use our results to demonstrate the average shadow economy estimates as of 2014 for 64 countries, along with the confidence intervals
    Keywords: Shadow economy, Currency Demand Approach, Measurement error, Confidence intervals
    JEL: C10 C51 C59 E26 H26 O17
    Date: 2020–03
  4. By: Joel Slemrod; Obeid Ur Rehman; Mazhar Waseem
    Abstract: We examine two Pakistani programs to see if the public disclosure of tax information and social recognition of top taxpayers promote tax compliance. Pakistan began revealing income tax paid by every taxpayer in the country from 2012. Simultaneously, another program began recognizing and rewarding the top 100 tax paying corporations, partnerships, self-employed individuals, and wage-earners. We find that both programs induced strong compliance responses. The public disclosure caused on average a 9 log-points increase in the tax paid by individuals exposed to the program. The increase was even larger for the social recognition program, around 17 log-points. Our results suggest that such programs can be important policy levers to mobilize resources, especially in weak-enforcement-capacity economies.
    Keywords: tax evasion, income tax, social norms
    JEL: H24 H25 H26
    Date: 2020
  5. By: Amakoe D. Alognon (International Center for Public Policy, Department of Economics, Andrew Young School of Policy Studies, Georgia State University); Antonios M. Koumpias (Department of Social Sciences, University of Michigan-Dearborn & Population Studies Center, Institute for Social Research, University of Michigan); Jorge Martinez-Vazquez (International Center for Public Policy, Department of Economics, Andrew Young School of Policy Studies, Georgia State University)
    Abstract: In the recent decades, several countries around the world have implemented cash restriction policies to incentivize the use of electronic means of payments with the aim to combat money laundering, terrorism financing, and tax evasion. This paper examines the impact of the proliferation in credit and debit card usage on consumption tax compliance using annual national level data for 26 European Union (EU) member states from 2000 to 2016. We measure consumption tax compliance using estimated Value-Added Tax (VAT) gaps, defined as the difference between the theoretical VAT liability according to the law and actual VAT collections. We exploit variation in time and space of credit and debit card usage across 26 EU member states from 2000-16 using panel data and instrumental variable techniques. We find that plastic money use significantly reduces tax evasion while cash withdrawals appear to noticeably widen the compliance gap. This paper contributes to the literature on the effect of modern means of payment on tax compliance by using a more adequate measure of the VAT compliance gap compared to earlier works and by accounting for potential confounders such as tax policy choices and ex ante enforcement capacity of tax administrations to curb the gap.
    Date: 2020–03
  6. By: Grzegorz Poniatowski; Mikhail Bonch-Osmolovskiy; José María Durán-Cabré; Alejandro Esteller-Moré; Adam Œmietanka
    Abstract: This Report has been prepared for the European Commission, DG TAXUD under contract TAXUD/2017/DE/329, “Study and Reports on the VAT Gap in the EU-28 Member States” and serves as a follow-up to the six reports published between 2013 and 2018. This Study contains new estimates of the Value Added Tax (VAT) Gap for 2017, as well as updated estimates for 2013-2016. As a novelty in this series of reports, so called “fast VAT Gap estimates” are also presented the year immediately preceding the analysis, namely for 2018. In addition, the study reports the results of the econometric analysis of VAT Gap determinants initiated and initially reported in the 2018 Report (Poniatowski et al., 2018). It also scrutinises the Policy Gap in 2017 as well as the contribution that reduced rates and exemptions made to the theoretical VAT revenue losses.
    Keywords: consumption taxation, VAT, tax fraud, tax evasion, tax avoidance, tax gap, tax non-compliance, policy gap
    JEL: H24 H26
    Date: 2019
  7. By: Fabio Mariani (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); Luca Pensieroso (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: Dans ce numéro de Regards économiques, nous discutons les liens entre économie souterraine, protectionnisme et immigration clandestine. Nous montrons que la réduction de la pression fiscale et la lutte contre la fraude fiscale peuvent contribuer à contenir l’immigration clandestine, et sont donc une alternative possible aux politiques coercitives basées sur le contrôle des frontières et les rapatriements. Au contraire, la mise en œuvre de politiques protectionnistes pourrait engendrer l’effet opposé et conduire à une augmentation du nombre d'immigrants clandestins.
    Date: 2019–06–20

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