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on Informal and Underground Economics |
| By: | Hjalte Fejerskov Boas; Niels Johannesen; Claus Thustrup Kreiner; Lauge Truels Larsen; Gabriel Zucman |
| Abstract: | In the second half of the 2010s more than 100 countries—including all large offshore financial centers—started to automatically exchange bank information with foreign tax authorities. This informational big-bang marks a break with the situation of offshore bank secrecy that prevailed before. We study its effects on tax compliance by analyzing the universe of information reports sent by foreign banks to Danish authorities, matched to population-wide micro-data on income, wealth, and cross-border bank transfers. In response to the automatic exchange of bank information, tax evaders may repatriate previously undeclared offshore wealth, they may start to self-report offshore income to the tax authorities, or the tax authorities may detect their evasion in audits that use the new information reports. Using a variety of research designs, we find large compliance effects along all these margins, with the largest response coming from repatriation of wealth. Overall we estimate that the automatic exchange of bank information has closed about 70% of the offshore tax gap. These results highlight the power of international cooperation to improve tax compliance: tax evasion is not a law of nature in a globalized world. |
| JEL: | D31 H24 H26 K34 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32714 |
| By: | Kohnert, Dirk |
| Abstract: | Sub-Saharan Africa (SSA) accounts for a third of the countries on the Financial Action Task Force (FATF) grey list. In the Money Laundering and Terrorist Financing (ML/TF) Ranking and Risk Assessment Tool, the region performed poorly in terms of resilience to ML/TF, with more than 60% of countries falling into the high-risk category. Although countries on the grey list are not subject to sanctions, inclusion on the list has a significant impact on their economies. This includes a significant reduction in capital inflows and foreign direct investment. The four main sources of illicit financial flows from SSA, South Africa, the Democratic Republic of Congo, Ethiopia and Nigeria, accounted for more than 50% of total illicit financial flows. While SSA received nearly $2 trillion in foreign direct investment (FDI) and official development assistance (ODA) between 1980 and 2018, it issued over $1 trillion in illicit financial flows. These illicitly acquired funds and diverted from the region continue to pose a development challenge. Illicit financial flows increased overall, but not concerning trade. In the 38 years from 1980 to 2018, they increased significantly in the 2000s, in parallel with the growth of African trade. Emerging and developing countries in Asia and the Middle East have become key targets. Previous initiatives to curb money laundering and improve the exchange of tax information between countries have largely failed, including the three most important: the Financial Action Task Force (founded in 1998), the Global Forum on Transparency and Exchange of Information for Tax Purposes (founded in 2009 ) and the Inclusive Framework on Base Erosion and Profit Shifting (founded in 2016). First, African countries lack the resources and capacity to address illicit financial flows. Second, many advanced economies are not sufficiently engaged in these initiatives. However, the repatriation of illegal funds is an important tool for strengthening the resource base of African countries. In 2020, for example, the United States and the self-governing British Crown Dependency of Jersey, one of the world's most notorious tax and money laundering havens, reached an agreement with Nigeria to repatriate more than $300 million stolen by Nigeria's former military dictator General Sani Abacha. |
| Keywords: | Money laundering; Money Laundering Control Act; Embezzlement; Corruption; tax evasion; Terrorism financing; Informal economy; Illegal drug trade; Human trafficking; Blood diamonds; Good governance; Sub-Saharan Africa; South Africa; Kenya; DR Congo; Ethiopia; Mozambique; Uganda; Rwanda, Nigeria; Ghana, Mali;, Cameroon; |
| JEL: | D23 D53 D63 D74 E21 E26 E42 F35 F38 F53 F54 G28 H26 K42 N27 N47 O17 Z13 |
| Date: | 2024–06–30 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:121354 |
| By: | Rafael Machado Parente |
| Abstract: | How do minimum wages affect earnings inequality in countries with large informal sectors? I provide reduced-form evidence that the 2000s minimum wage hike in Brazil raised overall inequality by increasing inequality inside the informal sector. I develop a model where heterogeneous firms select into informality to investigate when and how raising the minimum wage can increase inequality. I calibrate the model to Brazil and find that, by generating substantial informality, the increase in the minimum wage raised overall inequality by 6.4%. These results suggest that movements into and out of the informal sector modulate the effects of formal labor legislation. |
| Keywords: | Minimum wages; Inequality; Informality |
| Date: | 2024–07–19 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2024/159 |
| By: | François Roubaud (UMR LEDa, DIAL, IRD, CNRS, Université Paris-Dauphine, PSL, Paris, France); Mireille Razafindrakoto (UMR LEDa, DIAL, IRD, CNRS, Université Paris-Dauphine, PSL, Paris, France); João Hallak Neto (Brazil); Valéria Pero (Instituto de Economia da Universidade Federal do Rio de Janeiro - Brazil); André Simões (Brazil) |
| Abstract: | For nearly a decade, the Brazilian labour market has suffered from periods of deep crisis marked by the growth of unemployment and informality. In this general context, platform jobs, which emerged around 2016, appear with unequaled dynamism in job creation. However, it is difficult to quantify and qualify this phenomenon to date due to the lack of a suitable measuring instrument in Brazil and on a global scale. The nature of jobs and their quality is largely unknown. Therefore, this study has a dual objective. On the methodological front, it aims to contribute to the debate on the concepts and statistical tools needed for measuring the scale and the characteristics of this new type of job reliably. The empirical work is mainly based on the intensive processing of micro-data from the PNAD Contínua (the Brazilian Labour Force Survey). The changes observed in the various job characteristics over the long term as a result of the analysis provide an assessment of the relevance of the approach. On the analytical front, we propose to draw up a panorama as reliable as possible of platform employment in Brazil in its different dimensions (job structure and workers' characteristics, working conditions and earnings, professional trajectories, contribution to the household economy), focusing on the most “visible” of them: drivers and delivery workers. We show that these platform jobs in the transport sector represent a real opportunity. The vast majority of the jobs created are permanent and contribute significantly to the household economy. They are not just occasional jobs for supplementary income. Nor are they a stepping stone to formal employment. However, the jobs are of low quality: in terms of working conditions, they fall between informal and formal workers but closer to the former. Moreover, it should be stressed that their situation tends to deteriorate over time, becoming increasingly precarious. |
| Keywords: | Brazil, Digital Platform, Informal Economy, Labour Market, Structural Transformation |
| JEL: | E26 J21 J81 L16 O17 O33 O54 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:dia:wpaper:dt202408 |