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on Informal and Underground Economics |
| By: | Sébastien Laffitte (THEMA, CYU Cergy Paris University) |
| Abstract: | I investigate the determinants and consequences of the development of tax havens using a novel database that tracks the creation and development of offshore institutions in 48 tax havens. After describing the development of tax havens in the 20th century and several key empirical patterns, I explore their causal determinants. Building on the idea that tax havens are the suppliers in the market for offshore services, I show that demand shocks explain why countries become tax havens. I also find that competition shocks explain why tax havens update their regulations. This reaction is facilitated by the diffusion of legal technologies between tax havens. Finally, I show that becoming a tax haven generates GDP per capita gains and sectoral reallocation in countries adopting this status. In return, the tax structure of non-haven countries is affected by the rise of tax havens, resulting in an increased tax burden on labor relative to capital. |
| Keywords: | Tax Havens, Taxation, Regulatory Competition, International Taxation, Tax Avoidance, Tax Evasion |
| JEL: | H26 H73 H87 F39 N40 |
| Date: | 2024–03 |
| URL: | https://d.repec.org/n?u=RePEc:dbp:wpaper:022 |
| By: | Tomáš Boukal (Charles University); Petr JanskyÌ (Charles University); Miroslav PalanskyÌ (Charles University and Tax Justice Network) |
| Abstract: | We develop a methodology to decompose the tax revenue impact of the global minimum tax introduced in 2024 into several components and quantify its potential impact on profit shifting. We apply it to 34 thousand multinational-country observations from tax returns, financial statements and country-by-country reports of all multinationals active in Slovakia. We find that the global minimum tax has the potential to decrease profit shifting by most multinationals, which are on average likely to pay higher effective tax rates in most countries worldwide post-reform. We find that Slovak corporate tax revenues will increase by 4%, with half of the increase due to its minimum top-up taxes. The other half of the increase is corporate income tax on profits that will no longer be shifted out of the country. We expect the global minimum tax to target 49% of previously shifted profits. |
| Keywords: | Global minimum tax, profit shifting, multinationals, tax avoidance |
| JEL: | H25 H26 |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:dbp:wpaper:025 |
| By: | Sarah Clifford; Jakob Miethe; Camille Semelet |
| Abstract: | This paper characterizes profit shifting behavior across the size distribution of multinational enterprises (MNEs) to evaluate the targeting of the recently introduced Global Minimum Tax (GMT). Using German microeconomic administrative data with no reporting gaps for tax havens, we first document reductions in tax payments after tax haven subsidiaries are added to a group and confirm their outsized productivity. As group size increases, so does the likelihood of including tax haven subsidiaries. Second, we introduce a new methodology to estimate shifted profits at the group level and find an exponential group size gradient in profits shifted to tax havens. A total of EUR 19 billion was shifted to tax havens by German MNEs in 2022. Large groups targeted by the GMT account for 95% of this amount. While this is mainly a function of their size, we also document a positive gradient in profit shifting aggressiveness relative to employment. Third, we relate revenue potential from taxing excess profits in low-tax jurisdictions to compliance costs of the GMT, using a 15% benchmark rate. For groups currently covered by the GMT, revenue gains significantly dominate costs, while extending coverage to additional groups yields only modest net gains. Our results support policy consistency of the GMT in the face of recent unilateral challenges. |
| Keywords: | global minimum tax, multinational enterprises, profit shifting |
| JEL: | H26 G38 F34 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11975 |
| By: | Nandu Sasidharan |
| Abstract: | This paper presents a behavioural macro-dynamic model to study the relationship between informality, structural change, and public debt. Building on a structuralist framework, I innovate by using discrete choice theory to address the probability of workers being formal or informal. The formal sector combines manufacturing and business activities, while informality refers to the non-business low-productivity sector. It is shown analytically and through numerical simulations that when capital accumulation (g) is greater than interest rates (i), the unique equilibrium point is stable and formalisation implies higher debt. Reducing informality and public debt is possible only when i |
| Keywords: | Structural change; Dual economies; Informality; Public debt; Fiscal policy Jel Classification: O11, 017, E62, 041, E6 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:usi:wpaper:925 |
| By: | Jules Ducept (EU Tax Observatory, Center for Economics at Paris-Saclay); Evangelos Koumanakos (Hellenic Open University); Panayiotis Nicolaides (EU Tax Observatory, Paris School of Economics) |
| Abstract: | Using a quasi-experimental setting, we document that corporations decrease declared profits and corporate income taxes in response to an increase in the VAT rate. In an attempt to raise tax revenue during the Greek economic crisis, a 16% VAT rate, which existed for historicopolitical reasons in Greek islands, was harmonised to the national 24% rate. We combine tax filings with Orbis and ICAP data that enable us to geolocate corporations and to construct comparable groups based on locations in or out of the preferential rate. Counteracting the reform’s intended effect, declared profits decreased by 28% and corporate income taxes by 34% on a permanent basis. Macroeconomic factors and a fall in reported revenue cannot fully explain this decrease. Pervasive tax evasion in the Greek islands, where corporations might have an opportunity to adjust profits, offers a plausible explanation of the magnitude of responses. |
| Keywords: | Value-Added Tax; Corporate Income Tax; Greek Islands; Tax Evasion |
| JEL: | H25 H26 H32 H61 L83 |
| Date: | 2023–12 |
| URL: | https://d.repec.org/n?u=RePEc:dbp:wpaper:020 |
| By: | Jamalzai, Rahmatullah; Rasa, Muhammad Mirwais; Haq, Irfan Ul |
| Abstract: | This study examines the impact of tax evasion on Afghanistan's economic growth using an empirical approach. Tax evasion undermines public revenue, impedes state capacity, and distorts resource allocation — challenges that are particularly acute in fragile, post-conflict economies like Afghanistan. Utilising time-series data spanning 2005-2021, the study employs [e.g., Ordinary Least Squares (OLS) and Autoregressive Distributed Lag (ARDL)] to evaluate the relationship between estimated levels of tax evasion and key macroeconomic indicators, including GDP growth, government expenditure, inflation, and foreign direct investment. The findings reveal a statistically significant and negative relationship between tax evasion and economic growth, underscoring the detrimental effects of a weak tax compliance culture. The results highlight the urgent need for comprehensive tax reforms, strengthened institutional capacity, and enhanced enforcement mechanisms to curb tax evasion and stimulate sustainable economic development in Afghanistan. Policy implications and recommendations for future research are also discussed. |
| Keywords: | Economic Growth, Afghanistan, Tax Evasion, Tax Compliance, Revenue base |
| JEL: | F1 F13 F17 F18 G3 G38 |
| Date: | 2024–12–07 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:125169 |
| By: | Hjalte Fejerskov Boas (University of Copenhagen); Niels Johannesen (Oxford University and University of Copenhagen); Claus Thustrup Kreiner (University of Copenhagen); Lauge Larsen (University of Copenhagen); Gabriel Zucman (Paris School of Economics and UC Berkeley) |
| Keywords: | Automatic exchange of information, offshore tax evasion, tax compliance, repatriation of wealth |
| JEL: | D31 H24 H26 K34 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:dbp:wpaper:024 |
| By: | Deng, Guoying; Du, Pengcheng; Hernandez, Manuel A.; Xu, Shu |
| Abstract: | This paper examines the association between corporate income taxes and labor market informality. We present a theoretical framework showing that a higher tax enforcement can push firms to pass on the burden to workers by reducing their social security compliance as well as downsizing and lowering wages. The model propositions are tested using a regression discontinuity design that exploits a national corporate tax reform in China. We find that for every one percentage point increase in the effective tax rate, firms reduce their probability of making basic social security contributions by 0.8%, their compliance rate by 1.4 percentage points, and the probability of making supplementary contributions by 0.6%, while the number of workers and wages fall by 4.4% and 0.7%, respectively. We observe that the effects are more salient among firms privately owned and controlled, large businesses, and in locations where social security contributions are directly collected by the social security administration. The findings suggest that workers not only bear part of the higher corporate taxes faced by firms, but an increase in firms’ tax burden contributes to social security evasion and informality in labor markets. JEL Codes: H32, H55, J30, J23, H25 |
| Keywords: | taxes; labour market; social security; remuneration; China; Asia; Eastern Asia |
| Date: | 2024–03–18 |
| URL: | https://d.repec.org/n?u=RePEc:fpr:gsspwp:140480 |
| By: | Lambin, Roosa; Bado, Arsène Brice |
| Abstract: | This case study examines how social protection policymaking in Côte d'Ivoire has been shaped by a complex interplay of colonial legacies, postcolonial ideologies and domestic political-economic dynamics. Through stakeholder interviews and documentary analysis, it offers a nuanced understanding of the development of social protection arrangements in the country. The findings show that colonial rule established deep structural legacies that continue to constrain the scope and direction of social policy. The French administration embedded economic dependencies - most notably through integration into the CFA franc monetary zone and an economy centred on raw material exports - which continue to restrict the fiscal space needed for comprehensive, state-led social protection. In addition, the legal and administrative architecture introduced under colonialism remains influential, shaping how social protection is conceptualised and implemented. This has fostered an insurance-based model that prioritises formal sector workers, despite Côte d'Ivoire's large informal economy. Postcolonial policy influences constitute another, perhaps even more important factor shaping social protection in Côte d'Ivoire. Neoliberal reforms of the 1980s and 1990s, guided by international financial institutions, led to a retrenchment of state welfare functions and cemented external actors' roles in shaping domestic policy. Today, international partners such as the World Bank, UNICEF and the ILO play key roles in designing social protection strategies and programmes, largely thanks to their technical and financial assistance. At the same time, the country lacks a strong government-owned social policy vision, as the Ivorian development model primarily emphasises economic growth. Yet, some of the primary contemporary reforms - such as universal health coverage (CMU) and social insurance schemes for informal workers (RSTI) - reflect domestic social protection priorities under strong domestic leadership. The study highlights the need for a stronger government vision to advocate for a holistic social protection framework rooted in local realities. Moving towards a strong, domestically driven social protection expansion also requires strengthening domestic resource mobilisation, reducing reliance on external debt and leveraging regional cooperation. Collaboration with civil society organisations and leveraging informal social protection arrangements can also help develop and deliver contextually appropriate and inclusive social protection. |
| Keywords: | social security, international development coooperation, Côte d'Ivoire, Africa |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:diedps:320562 |
| By: | Bezerra De Goes, Carlos Andre; Canozzi Conceicao, Otavio; Lara Ibarra, Gabriel; Lopez-Acevedo, Gladys |
| Abstract: | What is the environmental impact of exports? Focusing on 2000–20, this paper combines customs, administrative, and census microdata to estimate employment elasticities with respect to exports. The findings show that municipalities that faced increased exports experienced faster growth in formal employment. The elasticities were 0.25 on impact, peaked at 0.4, and remained positive and significant even 10 years after the shock, pointing to a long and protracted labor market adjustment. In the long run, informal employment responds negatively to export shocks. Using a granular taxonomy for economic activities based on their environmental impact, the paper documents that environmentally risky activities have a larger share of employment than environmentally sustainable ones, and that the relationship between these activities and exports is nuanced. Over the short run, environmentally risky employment responds more strongly to exports relative to environmentally sustainable employment. However, over the long run, this pattern reverses, as the impact of exports on environmentally sustainable employment is more persistent. |
| Date: | 2025–07–14 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11172 |
| By: | Ekoh, Susan; Martin-Shields, Charles; Kitzmann, Carolin; Küssau, Nina; Pfeffer, Mario; Platen, Merle; Reinel, Theresa; Setrana, Mary Boatemaa; Appiah Kubi, Johnson Wilson; Effa, Stella |
| Abstract: | Climate change poses an existential threat to individuals and communities across the world. Populations with existing socio-economic vulnerabilities are the most affected, with people already experiencing climate-related losses and damages. Extreme weather events and other adverse impacts of climate change lead to forced displacement of populations to, from and within cities. Hence, building and supporting social cohesion in displacement contexts will be a key activity for development cooperation actors. This research study therefore explores these questions: How do the elements of social cohesion, trust, inclusive identity and cooperation for the common good, evolve within communities and across institutions in Accra's informal settlements? Additionally, what role do climate resilience efforts play in fostering or hampering vertical and horizontal social cohesion in Accra's informal settlements?Our findings suggest that limited institutional resilience efforts contribute to weak vertical cohesion between neighbourhoods and city authorities, undermining collective responses to climate challenges. The research emphasizes the need for a more integrated approach, whereby community-led initiatives and state interventions work together to strengthen resilience and social cohesion in Accra's informal settlements. |
| Keywords: | Urban Displacement, Social Cohesion, Climate Change, Ghana, Accra |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:diedps:319872 |
| By: | Benabdeljlil, Nadia; Kerzazi, Lamia |
| Abstract: | This research examines the impact of codes of conduct imposed by international lead firms on subcontractors in Morocco's textile and apparel sector. Based on a qualitative study conducted in the two main industrial hubs (Tangier and Casablanca), it explores the diffusion of corporate social responsibility (CSR) standards along the supply chain, their role in enhancing subcontractor capabilities, and their influence on inter-level relationships within the chain. The study highlights cross-cutting factors that place subcontractors in conditions that are not conducive to the effective implementation of CSR standards. It also shows that procedural audits associated with the enforcement of codes of conduct promote the spread of coercive isomorphism and foster a culture focused on strict compliance with formal rules. Furthermore, the research identifies two distinct profiles of subcontractors based on how they respond to institutional pressures to adopt these codes: those with minimal compliance, often engaging in rule-bypassing practices, and those adopting a proactive approach to internalising the standards. The study also uncovers factors explaining these divergent attitudes. Among the firms with a proactive stance, initiatives aimed at strengthening the capacities of their subcontractors are emerging. However, relationships with downstream actors in the supply chain remain characterised by a climate of mistrust, which limits the overall impact of these efforts. |
| Keywords: | CSR, codes of conduct, textile and apparel sector, Morocco, supply chain, lead firms, subcontractors, informal employment |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:diedps:320561 |
| By: | M Nana N'Goh N (UFHB - Université Félix Houphouët-Boigny [Abidjan, Côte d'Ivoire]); Konan Vincent (UFHB - Université Félix Houphouët-Boigny [Abidjan, Côte d'Ivoire]); Tia Godo (UJloG - Université Jean Lorougnon Guédé) |
| Abstract: | This study highlights the effects of economic insecurity and housing conditions on households with unstable incomes in Abidjan, particularly those in the informal sector. Using a mixed methodology combining qualitative and quantitative approaches, with a sample of 100 informal workers and 50 institutional actors, the analysis focuses on the relationship between housing costs, food, educational, and healthcare insecurity, and the survival strategies adopted by these households. The results reveal that rent consumes an disproportionate share of income, between 40 and 60%, far above the 30% threshold recommended by UN-Habitat, forcing households to make harsh trade-offs that affect their access to essential goods and services such as food, education, and healthcare.Adaptation strategies primarily include diversifying sources of income, with 85% of households engaged in informal activities. Informal debt and community support networks (interpersonal solidarity) have become crucial mechanisms for managing precarity. Furthermore, residential mobility that leads some households to move to cheaper but poorly serviced peripheral neighborhoods exposes the processes of marginalization and spatial relegation of vulnerable populations. This dynamic of relegation exacerbates social exclusion and reinforces socio-economic inequalities by limiting access to critical resources such as education, health, and transportation.The study advocates for a reform of public policies to effectively integrate informal workers into formal social protection systems. Keywords: Economic insecurity, Housing, Informal work, Adaptation, Social inequalities, Public policies. |
| Abstract: | Cette étude met en lumière les effets de la précarité économique et des conditions de logement sur les ménages à revenus instables à Abidjan, en particulier ceux appartenant au secteur informel. En adoptant une méthodologie mixte, combinant des approches qualitatives et quantitatives, avec un échantillon de 100 travailleurs informels et 50 acteurs institutionnels, l'analyse s'intéresse à la relation entre la charge locative, la précarité alimentaire, éducative et sanitaire, et les stratégies de survie adoptées par ces ménages. Les résultats révèlent que le loyer représente une part disproportionnée des revenus, entre 40 et 60 %, bien au-dessus du seuil des 30 % recommandé par l'ONU-Habitat, contraignant les ménages à des arbitrages sévères affectant leur accès à des biens et services essentiels tels que la nourriture, l'éducation et la santé. Les stratégies d'adaptation se manifestent principalement par la diversification des sources de revenus, avec 85 % des ménages impliqués dans des activités informelles. L'endettement informel et les réseaux d'entraide communautaire (solidarité interpersonnelle) deviennent des mécanismes indispensables de gestion de la précarité. Par ailleurs, la mobilité résidentielle, qui oriente une partie des ménages vers des quartiers périphériques moins coûteux mais dénués d'infrastructures essentielles, révèle les processus de marginalisation et de relégation spatiale des populations vulnérables. Cette dynamique de relégation accentue l'exclusion sociale et renforce les inégalités socio-économiques en limitant l'accès à des ressources critiques comme l'éducation, la santé et le transport. L'étude plaide pour une réforme des politiques publiques, en vue de l'intégration effective des travailleurs informels dans des dispositifs de protection sociale formalisés. |
| Keywords: | Précarité économique Logement Travail informel Adaptation Inégalités sociales Politiques publiques Economic insecurity Housing Informal work Adaptation Social inequalities Public policies, Précarité économique, Logement, Travail informel, Adaptation, Inégalités sociales, Politiques publiques Economic insecurity, Housing, Informal work, Social inequalities, Public policies |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05078227 |