nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2022‒09‒26
four papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Immigration, wages, and employment under informal labor markets By Delgado Prieto, Lukas Andres
  2. Illicit Financial Flows - Illicit drug trafficking and tax evasion By Johnny Flentø; Leonardo Santos Simao
  3. Compliance Costs of Regulations and Firm Productivity (Japanese) By MORIKAWA Masayuki
  4. Revenue Administration: Compliance Risk Management: Overarching Framework to Drive Revenue Performance By Ms. Susan E Betts

  1. By: Delgado Prieto, Lukas Andres
    Abstract: This paper studies the labor market impacts of Venezuelan immigrants in Colombia. Exploiting spatial variation in exposure, I find a negative effect on native wages driven by the informal sector (where immigrants are concentrated) and a reduction in native employment in the formal sector (where the minimum wage binds for many workers). To explain this asymmetry, I build a model in which firms substitute formal for informal labor in response to lower informal wages. Consistent with the model's predictions, I document that the increase in informality is driven by small firms that use both labor types in production.
    Keywords: Immigration; Event Study; Labor Market; Informality
    JEL: F22 O15 O17 R23
    Date: 2022–09–09
  2. By: Johnny Flentø (Development Economics Research Group, University of Copenhagen); Leonardo Santos Simao (Former Minister of Health, Former Minister of Foreign Affairs & Cooperation, Government of Mozambique)
    Abstract: The discourse about illicit financial flows (IFFs) repeatedly stresses promoting development and equality in the world, but the links between them are much more difficult to ascertain. As defined in relation to Sustainable Development Goal (SDG) 16, the concept of what is illicit rests on definitions of terror and crime, on which there is no universal agreement, and it contains too many and too different types of flows to be of operational use in policy formulation. Combined with the difficulties and weaknesses in estimating the aggregate volume of illicit flows, this broad umbrella definition of the term lends itself to the harbouring of various political agendas and instrumentalizations of the concept for other political ends. The discourse that illicit flows undermine development seems widely accepted, as long as one does not have to be specific. However, to address questions about the effects of anti-IFF initiatives and which anti-IFF initiatives actually work, we need much more sector-specific and granular analysis, as some researchers are already pursuing. In this paper we argue that there is large potential for stemming illicit flows if some drugs are legalized and the fencing of stolen money in tax havens and secrecy jurisdictions is effectively outlawed. Important and potentially strong initiatives which could change the tax landscape are under way. However, they are geared more towards corporations and less towards trusts and individuals, and they stop short of criminalizing the fencers of illicit money. In relation to inequality, the reforms will mainly assist governments in the rich countries, primarily OECD countries, to tax and redistribute income from very large and wealthy corporations. Taxation tools that could effectively redistribute income from the large tech giants and other multinational enterprises to the world’s poor are not really on the table. At the same time, the rich countries insist on globally outlawing many drugs that would make excellent cash crops for farmers in poor countries, primarily because they anticipate a public health problem at home. In curbing illicit flows with a development effect, legalizing cannabis should be high on the agenda.
    Keywords: Illicit Financial Flows, Tax Evasion, Drug Trafficking, Extractives, Tech Giants,
    JEL: F10 F18 F23 F51 H23 H26
    Date: 2022–08–07
  3. By: MORIKAWA Masayuki
    Abstract: This study proposes a new method of measuring compliance costs of regulations by focusing on labor input and estimates the compliance costs in Japan based on a survey of workers. According to the results, the working hours required to comply with rules and regulations account for more than 20% of total labor input. By industry, this cost is higher in the finance and insurance industry, followed by the health and welfare industry, and by firm size, it is higher in large firms. A large proportion of the working hours of high-wage workers are devoted to these tasks. If these costs were halved, overall economic productivity would increase by about 8%. This suggests the importance of reducing costs through deregulation and digitalization.
    Date: 2022–08
  4. By: Ms. Susan E Betts
    Abstract: This technical note describes CRM at a high level and how tax administrations can implement a CRM framework to significantly strengthen revenue outcomes. A tax administration’s primary role is to collect revenues on behalf of government to fund the country’s social and economic goals. Taxpayers are expected to comply with their tax obligations as stated in the law. Compliance is the degree to which taxpayers meet their obligations, whether voluntarily or through efforts by the tax administration to enforce compliance. Using CRM allows a country to optimize its revenue collection by identifying and focusing resources on the highest risks to the tax base. While the concepts of CRM are transferable to the customs context, this note focuses on tax administration compliance risks.
    Keywords: CRM framework; CRM process; CRM activity; framework to drive revenue performance; compliance risk; Tax administration core functions; Compliance risk management; Revenue mobilization; Compliance improvement plans
    Date: 2022–08–26

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