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on Informal and Underground Economics |
| By: | Daniel Overbeck; Eliya Lungu |
| Abstract: | This paper shows that bargaining over tax payments is an important feature of tax compliance and enforcement in lower income countries. Analyzing the universe of administrative tax filings from Zambia, we document sharp bunching in (i) dominated regions above tax schedule discontinuities, inconsistent with standard models of tax compliance and (ii) at round number tax payments, implying that certain payments are being targeted. Additional evidence from our own survey suggests that discussing tax payments with tax officials before filing taxes is widespread, in line with tax payments being the outcomes of bargaining. Such bargaining over taxes is consistent with fact (ii), as bargaining outcomes are often round and salient numbers, and with fact (i), because tax schedule discontinuities restrict the set of feasible bargaining outcomes. Finally, we generalize the conventional Allingham & Sandmo (1972) model to allow for bargaining as a mode of tax compliance. We show that bargaining leads to Pareto-improvements for both taxpayers and the state as long as state capacity is sufficiently low. |
| Keywords: | taxation, bargaining, development, small-and medium enterprises, tax compliance, Zambia |
| JEL: | H20 O17 D73 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12172 |
| By: | Subhayu Bandyopadhyay; Sugata Marjit; Santiago Pinto; Marcel Thum |
| Abstract: | We investigate the trade-off policymakers face between raising tax revenues for public good provision and mitigating the distortionary effects of taxation when individuals can evade taxes and allocate work hours between legal and clandestine (illicit) activities. These distortions lower the constrained optimal tax rate and result in the under-provision of the public good. This under-provision problem is mitigated when surplus from the audit agency is seamlessly transferred to the taxing authorities. Extensions of the basic model incorporate agent heterogeneity and a more general specification of the concealment cost function for infringements. |
| Keywords: | Taxation; evasion; compliance; legal and illicit activities; public goods; externalities |
| JEL: | H40 K10 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedrwp:101772 |
| By: | WU, Da-Kai; Ko, Yi-Chun |
| Abstract: | This paper evaluates the lasting impact of India's 2016 demonetization on tax collection. Using the synthetic control method and cross-country panel data from 2005-2022, we find a statistically significant and persistent increase in sales and production tax revenues, but no comparable change in income and profits tax collections. Mechanism tests suggest that cash usage fell and digital payments rose during 2016 and 2017, but both returned to pre-demonetization levels from 2018 onward. The size of the informal economy remained unchanged. These findings cast doubt on demonetization's effectiveness as a tool for broadening the tax base and reducing informality. The sustained rise in indirect tax revenues is more plausibly attributable to concurrent structural reforms, particularly the Goods and Services Tax, rather than to demonetization itself. By distinguishing between short-term payment disruptions and long-term revenue effects, this study provides new evidence on the limits of one-off policy shocks in achieving lasting tax compliance. |
| Keywords: | JEL classfication: E02, H26, O23, India demonetization, tax collection, tax compliance, digital payment, synthetic control method |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:agi:wpaper:02000250 |
| By: | Mallett, Richard |
| Abstract: | It is often assumed that despite contributing towards the ongoing casualisation of work across the global North, in Southern contexts of already-high labour informality the expansion of the global platform economy is conversely helping to formalise people’s work. A process, as it were, of ‘plat-formalisation’. Drawing on original case study material from Uganda’s motorcycle-taxi sector, this article responds to recent calls within the field of critical platform scholarship for more ‘theory from’ the South by carrying out a grounded investigation of the relationship between processes of platformisation and dynamics of in/formalisation. In contrast to prevailing ideas about the formalising properties of digital labour platforms in such settings, it clearly shows that inclusion within the ride-hail platform economy brings moto-taxi riders no closer to formal status in any meaningful way. Despite early collaborative engagement with state actors, Uganda’s ride-hail platforms operate in unilateral, platform-specific ways that undermine prospects for sectoral standardisation, accept zero legal responsibility for the welfare and safety of those labouring/transacting through their apps, and exhibit reluctance to enhance the political legibility of the rider workforce through data-sharing with government. But more than this: by manufacturing what this article terms an ‘aesthetics of formality’, the platformisation of Uganda’s moto-taxis also enables the conduct of commercial activity beneath the surface, culminating in a dynamic that sees the economic value created by (still-)informal workers captured by formal private enterprise. Seen through this particular Southern lens, the conventional logics of plat-formalisation quickly start to come unstuck. |
| Keywords: | informal economy; formalisation; digital labour platforms; motorcycle taxis; Uganda |
| JEL: | R14 J01 |
| Date: | 2025–09–15 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:129168 |
| By: | Bruckmeier, Kerstin; Dolls, Mathias; Necker, Sarah; Peichl, Andreas; Windsteiger, Lisa |
| JEL: | J22 J46 J48 H26 H31 H53 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:vfsc25:325413 |
| By: | Fietz, Katharina; Lakemann, Tabea; Beber, Bernd; Priebe, Jan; Lay, Jann |
| JEL: | O12 O17 J46 J81 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:vfsc25:325459 |
| By: | Mauricio Velásquez (Universidad de los Andes); Beatriz Irene Ramos (Universidad de los Andes); María Alejandra Vélez (Universidad de los Andes); Diana Millan-Orduz (Universidad de los Andes); Vanesa Estefanía Ospina-Ramírez (Universidad de los Andes) |
| Abstract: | Las economías rurales en regiones de frontera en muchos países del sur global comparten configuraciones institucionales donde se superponen economías legales e ilegales, actores armados no estatales y formas frágiles o selectivas de presencia estatal. Este es el caso en muchas regiones de Colombia, donde economías rurales históricamente se han desarrollado y transformado bajo los órdenes sociales establecidos en el contexto del conflicto armado. Este artículo examina las transiciones entre coca, ganadería y minería de oro en dos municipios ubicados en el arco de deforestación Amazónico—Puerto Guzmán (Putumayo), y Vista Hermosa (Meta)— donde la coca ha perdido centralidad económica tras procesos de desconcentración después del Acuerdo de Paz con las FARC-EP. Con base en una metodología mixta que combina análisis geoespacial, entrevistas, cartografía social y trabajo de campo, mostramos que la transición de la coca hacia la ganadería y la minería de oro se acompaña de regulaciones armadas que reconfiguran tierra, capital y trabajo, y profundizan la deforestación. El argumento central es que estas transiciones no suponen una salida del conflicto ni una formalización económica, sino la aparición de nuevas formas de gobernanza criminal que regulan actividades económicas en zonas grises de legalidad. Estas formas se apoyan en la herencia de las infraestructuras del conflicto armado y en mecanismos de legitimación social, permitiendo a actores armados regular actividades en apariencia lícitas. Dialogando con los conceptos de economías grises y criminal politics, el artículo muestra cómo estas configuraciones híbridas profundizan la informalidad económica en el territorio y agravan la deforestación, revelando los límites del posacuerdo como escenario de transición hacia el orden estatal. |
| Keywords: | economías ilegales; gobernanza criminal; economías rurales; deforestación; región amazónica |
| JEL: | Q15 Q23 Q33 Q34 R14 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:col:000089:021634 |