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on Informal and Underground Economics |
| By: | Harju, Jarkko; Kotakorpi, Kaisa; Matikka, Tuomas; Nivala, Annika |
| Abstract: | The abstract will be added on Tue 4.6.2024. |
| Keywords: | tax compliance, tax evasion, tax enforcement, firm behavior, Social security, taxation and inequality, H26, H32, H83, fi=Verotus|sv=Beskattning|en=Taxation|, |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:fer:wpaper:165&r= |
| By: | Gaëlle Lebeau (MINEA - UG - Université de Guyane, UG - Université de Guyane) |
| Abstract: | In French Guiana, one person in two is currently working without being declared. And for the vast majority of these people, this is their only job. In this territory, where illegal immigrants account for some 4.4% of the population, undeclared work is almost the rule! In her doctoral thesis, begun in 2020, Gaëlle Lebeau analyses the economic and social phenomena that encourage it. |
| Abstract: | En Guyane, une personne sur deux travaille aujourd'hui sans être déclarée. Et pour l'immense majorité de ces personnes, il s'agit de leur seul emploi. Dans ce territoire, où les clandestins représentent quelque 4, 4% de la population, le travail dissimulé est presque la règle ! Dans sa thèse de doctorat, commencée en 2020, Gaëlle Lebeau analyse les phénomènes économiques et sociétaux qui le favorisent. |
| Keywords: | French guiana, Migration policies, Economic development, Informal economy, Immigrant population, Informal work, Guyane Française, travail informel, Population immigrée, économie informelle, Développement économique - Emploi, Politiques migratoires |
| Date: | 2022–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04571258&r= |
| By: | Joaquin Garcia-Cabo; Rocio Madera |
| Abstract: | This paper documents the role of unemployment and earnings risk in reconciling evidence in payoff differentials between self-employment and paid-employment. Using Spanish administrative data, we characterize the distribution and dynamics of earnings and document lower and less dispersed earnings in self-employment. We consider alternative hypotheses and highlight the role of lower unemployment risk in self-employment. We decompose earnings risk dynamics by estimating a life-cycle earnings process. Indeed, the self-employed experience lower returns but also face lower volatility and persistence of shocks throughout their life-cycle. Our results challenge the conventional view that self-employment necessarily entails higher risk and highlight that accounting for differences in labor earnings risk is important to reconcile the payoff differentials between self-employment and paid-employment. |
| Keywords: | self-employment, segmented labor markets, earnings risk, income process |
| JEL: | J24 J31 J41 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11136&r= |
| By: | Arewa, Moyo |
| Abstract: | This paper explores the potential benefits and risks to tax administrations of implementing central bank digital currencies (CBDCs), a digital version of national currencies that is gaining momentum worldwide. It outlines some of the key features of CBDCs and then considers their implications for tax administration in low- and middle-income countries (LMICs) generally. The emergence of CBDCs provides LMICs with a significant opportunity to improve financial inclusion, improve payment systems and increase tax collection. CBDCs provide greater transparency, security and traceability, which could help tax authorities track income and net worth, detect tax evasion and increase tax revenue. However, there are also complex combinations of risks associated with deploying CBDCs. The revenue authorities need to thoroughly assess how they should adapt to these challenges. Governments must also ensure that CBDCs are developed and implemented transparently, fairly and consistently with broader public policy goals. This will help maximise the potential benefits of CBDC adoption while mitigating the risks – which may be particularly significant in LMICs. |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:idq:ictduk:18361&r= |
| By: | Mutsami, Chrispinus; Parlasca, Martin C.; Qaim, Matin |
| Abstract: | Livelihood sources in rural Africa are diverse and dynamic. Using recent primary data from four African countries — Kenya, Namibia, Tanzania, and Zambia — we consider regions with different conditions related to climate, agroecology, infrastructure, and nature conservation to analyze the role of various income sources for households and individuals. While most rural households are involved in small-scale farming, we challenge the conventional notion that own agricultural activities still constitute the main source of income. Off-farm sources account for 60% of total household income on average. The off-farm income share increases with total income, meaning that the poorest households are the ones most dependent on agriculture. These patterns are similar across all four countries. While the concrete off-farm activities differ by context, most off-farm jobs are self-employed activities in small informal businesses. More lucrative formal employment opportunities are rare and mostly pursued by individuals with post-secondary education and training. Males are more likely to be involved in wage employment than females. Furthermore, individual social networks and access to road and market infrastructure increase the likelihood of off-farm employment. These results emphasize the policy need to acknowledge the important role of rural off-farm jobs and to invest more into generating inclusive non-agricultural employment. |
| Keywords: | Agricultural and Food Policy, Community/Rural/Urban Development |
| Date: | 2024–06–12 |
| URL: | https://d.repec.org/n?u=RePEc:ags:ubzefd:343385&r= |
| By: | Bjørkheim, Julie Brun (Dept. of Business and Management Science, Norwegian School of Economics); Nygård, Odd E. (Research Dept., Statistics Norway) |
| Abstract: | Using the expenditure approach and administrative data on third-party reported donations, we estimate tax evasion by gender. While men are more prone to risk taking, we find no evidence of this transferring to income underreporting among the self-employed in Norway. Instead, self-employed women evade more than men. This tendency holds when controlling for sector affiliation and using household fixed effects and event study equivalents. We find that self-employed women face lower chances of penalty taxes and lighter penalties when caught, possibly due to biased predictive models, which may explain their higher evasion rates. |
| Keywords: | Tax Evasion and Avoidance; Gender; Tax Enforcement; Charity |
| JEL: | H25 H26 J16 |
| Date: | 2024–06–18 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:nhhfms:2024_008&r= |
| By: | Asmare, Fissha; Yimam, Seid; Semreab, Etsehiwot |
| Abstract: | Presumptive tax has become a popular way of taxing businesses operating in the informal sector in middle- and low-income countries. The introduction of the presumptive tax system in Ethiopia in 2002 was intended to widen the tax base by bringing more informal sector operators into the tax net. However, the unintended consequences of its introduction were not adequately scrutinised, and it has been a source of criticism and complaints due to its alleged unfairness and lack of clarity in its implementation. A simple imposition of the presumptive tax upon the informal sector, without considering its complexity and the diversity of its actors, might have various negative consequences. In particular, it would likely compromise both horizontal and vertical equity. This study examines the issue empirically, exploring the equity implications of the presumptive tax system to tax the informal sector in Addis Ababa. The informal sector receives limited attention from either policymakers or researchers, and, prior to this research, we had no evidence on the characteristics of informal micro enterprises and the equity implications of Ethiopia’s presumptive tax system. |
| Keywords: | Finance, |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:idq:ictduk:18375&r= |
| By: | Hakizimana, Naphtal; Santoro, Fabrizio |
| Abstract: | Data on economic transactions is crucial for tax administrations to be able to enforce tax compliance, and technology can be key to obtaining information. In the last decade, African tax administrations have increasingly adopted technological advances such as integrated systems, electronic filing, and electronic billing machines (EBMs). EBMs allow taxpayers to digitise their transactions and transfer billing information automatically to the revenue authority. They have high potential, as they allow firms to lower their administrative and compliance costs, streamline transactions, improve record-keeping, strengthen their administrative capacity and, in the case of small businesses, improve their ability to attract clients and engage in trade thanks to improved accuracy and transparency. Rwanda is one of Africa’s fastest growing and most technology-oriented countries. The government is highly reliant on technology to improve tax revenues. In 2013, the Rwandan Revenue Authority (RRA) introduced EBMs through a machine called EBM1. This used a SIM card, through which VAT-registered taxpayers transmitted sale transaction data to the RRA in real time. Like any technology, there were practical challenges, such as the cost of acquiring and maintaining the machine, limitations in storing information and lack of remote support. As a result, an improved, free, software version called EBM2 was rolled out in 2017 and is still in use. This can digitise and store receipts, capture core business information like inventory and type of items sold, automatically validate buyers’ identity and provide support online. This paper evaluates the impact of the implementation of EBM2 on VAT and income tax compliance. Thanks to a collaboration with the RRA, we looked at around 60, 000 EBM users’ monthly/quarterly VAT and annual income tax returns from 2013 to 2020. We focus specifically on two groups: those who had previously used EBM1 and shifted to EBM2 (shifters), and those who only adopted EBM2 (new users). Taking advantage of the fact that EBM2 adoption happened over time, we conduct a difference-difference strategy to estimate the impact of EBM2 on key outcomes for both VAT and income tax, including the discrepancy in reported turnover between the two tax heads. |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:idq:ictduk:18354&r= |
| By: | PHAM PHUONG NGOC (Diplomatic Academy of Vietnam, Hanoi, Vietnam); DAINN WIE (National Graduate Institute for Policy Studies, Tokyo, Japan) |
| Abstract: | Trade can significantly reduce informality in developing countries by fostering economic growth and creating formal employment opportunities. A large proportion of workers in developing countries such as Vietnam work in the informal sector, making them vulnerable and less productive. This study examines the short-term impact of the US– China trade war as a positive demand shock on the informality of Vietnam's labor market, using nationally representative data from the Vietnam Labor Force Survey from 2017 to 2019. We create an industry-level measure based on variations in tariff increases applied to Chinese goods, representing the tariff advantages granted to Vietnamese firms. The estimation results show that workers in industries with higher tariff advantages are less likely to be employed as informal or uninsured workers. By applying Goldberg and Pavcnik’s (2003) framework, we interpret these findings as indicating that Vietnamese firms perceived the US–China trade shock as a positive and permanent demand shock. To our knowledge, the empirical evidence presented in this study represents a rare investigation into the effects of the trade war on the labor market of a non-participating country. Additionally, the findings offer important implications for other developing countries by showing how Vietnam’s labor market and informality improved as firms took advantage of the new trade opportunities created by trade diversion. |
| Keywords: | labor market informality; trade war; trade diversion, tariffs |
| Date: | 2023–09 |
| URL: | http://d.repec.org/n?u=RePEc:ngi:dpaper:23-09&r= |
| By: | Scarpini, Celeste; Santoro, Fabrizio; Abounabhan, Mary; Diouf, Awa |
| Abstract: | Mobile money-enabled digital merchant payments have significant promise for enhancing tax compliance in lowincome countries, and addressing persistent challenges. First, digital merchant payments offered by mobile money providers guarantee greater accessibility to safer and faster formal payment. Second, they help businesses to keep comprehensive records of their activities, expenses, and receipts – enhancing accuracy of tax filing, and perceptions of the tax administration’s monitoring and enforcement capabilities. Third, they improve businesses’ perceptions of the transparency and predictability of the tax system, by using more precise digital information for tax calculations. In addition, governments can use digital merchant payments to encourage business formalisation, by exempting them from new taxes on mobile money transactions. Many African governments use this strategy, while taxing other transaction types – such as mobile money withdrawals and person-to-person transfers. |
| Keywords: | Finance, |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:idq:ictduk:18363&r= |
| By: | David Lam (University of Michigan); Murray Leibbrandt (SALDRU, University of Cape Town) |
| Abstract: | The world is projected to add 2.5 billion people to the total population and 1.1 billion people to the working-age population between 2020 and 2100. Almost all of the additional working-age people will be added in Sub-Saharan Africa, a dramatic change from previous decades, when the growth of the working-age population was concentrated in Asia. This chapter analyzes the demography of the African labor force in the coming decades using the latest United Nations population projections. We show that by 2050 Africa will be the only region in the world with a growing working-age population and will be the only region in which the ratio of dependents to working-age population is falling. These dramatic differences are the result of Africa’s later and slower fertility decline, with fertility still high in many African countries. Being the only region with a growing working-age population may create opportunities for investment and economic growth in Africa. This growing working-age cohort and especially its females have higher years of schooling than any previous generation. But the quality of their education still lags other regions. On the demand side, Africa needs to produce 2 million jobs per month by 2040 to keep up with the growth of the working-age population. This rate of job creation is similar to that produced in Asia during the period in which its working-age population was growing at similar rates. Still, this remains a daunting challenge for Africa in the coming decades. The dominance of the informal sector in all African labor markets, with the exception of a few upper middle-income contexts, implies that formally measured unemployment rates are not likely to provide telling metrics of African success. Rather, the focus for growth and improved development outcomes has to be on formal sector job creation alongside notably stronger linkages into the informal sector than has been the case to this point. |
| Date: | 2023 |
| URL: | https://d.repec.org/n?u=RePEc:ldr:wpaper:303&r= |