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on Informal and Underground Economics |
| By: | Ahmad, Mustajab; Audi, Marc; Ahmad, Khalil |
| Abstract: | This study investigates how tax policies affect small and medium enterprises in developing countries between 2005 and 2023. Panel data regression analysis is employed to examine how performance indicators such as revenue growth, employment generation, and formalisation processes are linked to tax rates, costs associated with complying with value-added tax, the structure of value-added tax, incentive mechanisms, levels of informality, and the quality of public services. The results show that higher rates of tax compliance and effective tax rates negatively influence the performance of small and medium enterprises, supporting the resource-based view theory, which holds that such enterprises are more adversely impacted by tax burdens due to their limited resources. In contrast, tax incentives have a strong positive effect, while informality has a significant negative impact. Through this study, fiscal exchange theory is validated in the context of developing countries, indicating that small and medium enterprises are more likely to comply with tax regulations when they perceive public services to be of high quality. The analysis integrates data from multiple countries and draws on classical economic theory and institutional theory. The key policy implications explain that developing countries should simplify tax systems, design targeted incentives, and adopt digital mechanisms to enhance the competitiveness of small and medium enterprises while addressing informality. The study addresses gaps in the literature related to taxation in developing economies and guides policymakers seeking to strengthen the role of small and medium enterprises in promoting economic growth and employment. |
| Keywords: | Small and Medium Enterprises, Tax Policy, Informality, Developing Economies |
| JEL: | H3 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:127564 |
| By: | Olurotimi, Osaretin |
| Keywords: | International Development |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea25:360994 |
| By: | Ginting, Edimon |
| Abstract: | Tax evasion has been studied intensively in the context of developed countries in which the institutional environment assumes a pervasive respect for the rule of law. In many developing nations such an assumption is not warranted. The objective of this paper is to develop a model of tax evasion apposite to an institutional set up in which corruption is endemic. The services of corrupt intermediaries are required by otherwise legitimate producers in order to navigate the informal 'laws' put in place by rent seekers with good connections. The model developed here posits a service providing industry which produces legitimate public services and corrupt intermediation as joint products which exploit economies of scope available to senior bureaucrats. The model can be used in various ways; in this paper a cut in the tax rate on income from capital is examined. Under certain conditions such a cut can lead to increased government revenue, giving a new explanation of how a kind of Laffer curve may operate in economies with endemic corruption. |
| Keywords: | Financial Economics, Political Economy, Public Economics |
| URL: | https://d.repec.org/n?u=RePEc:ags:copspp:266392 |
| By: | Ginting, Edimon; Powell, Alan A. |
| Abstract: | In some developing economies the costs of meeting informal taxes (corruption of various sorts) have been put as high as 30 percent of the market value of output in some industries. Current political reform in Indonesia raises the prospect of a substantial fall in such costs. To assess the consequences for Indonesia's international competitiveness and national welfare requires the development and use of an applied general equilibrium model which explicitly recognises the existence of non-official imposts and the substantial (but socially wasteful) economic activity expended in attempting to reduce them. ORANI-RSA is such a model, recently developed for this purpose. In short- and longrun simulations the nominal rate at which informal taxes are levied is halved and the response of the economy determined. Not unexpectedly, competitiveness and the trade account improve sub§tantially (with a 2 percent short-run fall in the real foreigncurrency cost of the Rupiah). Indonesian welfare also improves. The only industry to decline is the service providing sector (corresponding roughly to the bureaucrats who supply intermediation between legitimate producers and the corrupt members of the power elite). The reform causes a fall in income from corruption, while redistributive effects via differential consumption patterns reinforce the improvement in the trade balance. |
| Keywords: | Financial Economics, International Development, Public Economics |
| URL: | https://d.repec.org/n?u=RePEc:ags:copspp:266363 |
| By: | Owen, P. Dorian; Solis-Fallas, Otton |
| Abstract: | The new structuralists' critique of financial liberalization emphasizes the role of informal credit markets in financing firms' residual credit demand in LDCs and the relevance of households' portfolio substitution patterns. The sensitivity of their policy conclusions is demonstrated in the context of a representative model developed by van Wijnbergen; the relative efficiency of intermediation in the formal and informal credit markets crucially affects the outcome of the portfolio allocation effects generated by higher bank deposit rates. An anomaly in the characterization of 'unproductive' assets in defining credit supply is also examined. |
| Keywords: | Financial Economics |
| URL: | https://d.repec.org/n?u=RePEc:ags:canzdp:262919 |
| By: | Jaime Vallés Giménez; Anabel Zárate Marco |
| Abstract: | En el Impuesto sobre la Renta de las Personas Físicas (en adelante, IRPF) los individuos declaran voluntariamente la renta obtenida durante el período impositivo, determinan su deuda tributaria y, finalmente, la pagan. Esta voluntariedad en la obligación tributaria hace que el cumplimiento fiscal, en ocasiones, no sea total, bien porque no se presenta la declaración (nonfiling gap), porque no se declara toda la renta (underreporting gap), o porque no se paga en su totalidad la cuota tributaria (underpayment gap). La diferencia entre lo que los contribuyentes pagan de impuestos y lo que deberían pagar si cumplieran completamente con la legislación fiscal constituye el fraude, evasión o brecha fiscal (tax gap). |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:fda:fdaeee:eee2026-03 |