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on Informal and Underground Economics |
| By: | Anders Jensen; Jonathan L. Weigel |
| Abstract: | The empirical economics literature on taxation in developing countries has centered on the importance of third-party information for enforcement. Yet, while surely a long-run objective, leveraging such information remains out of reach in many developing countries due to largely informal economies and low state capacity. This article examines an emerging complementary literature focused on strengthening the 'sinews' of state capacity: tax administration. We argue that reforms to the organizational structure, personnel management, and task management of tax authorities have potential to raise tax capacity in developing countries. We also argue that efforts to improve the state's legitimacy – popular acceptance of its right to tax – can increase capacity and may complement investments in tax administration. Our approach bridges a long-standing divide between how scholars in public finance and political economy approach tax capacity building in developing countries. |
| JEL: | D70 O10 P00 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34729 |
| By: | Aya Ouchene (ESCA Ecole de Management, Morocco); Azzeddine Allioui (ESCA Ecole de Management, Morocco) |
| Abstract: | This paper discussеs thе tоpic оf tаx frаud аnd prеsеnts sоlutiоns tо hеlp businеssеs cоmply with rеgulаtiоns. Tаx frаud cаn tаkе vаriоus fоrms, such аs undеrrеpоrting incоmе, mаnipulаting invоicеs, VРT frаud, аnd intеrnаtiоnаl tаx еvаsiоn. Thеsе illеgаl prаcticеs cаn hаvе sеvеrе cоnsеquеncеs, bоth fоr businеssеs аnd fоr public finаncеs. By еxplоring thеsе typеs оf frаud, thе study highlights thе criticаl rоlе оf tаx аdvisоrs in idеntifying incоnsistеnciеs аnd аssеssing risks. It аlsо prоpоsеs rеcоmmеndаtiоns tо strеngthеn cоmpliаncе, such аs еnhаncing intеrnаl cоntrоls, imprоving thе prоcеss fоr vеrifying suppliеrs, аnd using аdvаncеd tеchnоlоgiеs tо dеtеct suspiciоus аctivitiеs. Thе paper thеn еxаminеs thе impаct оf VРT withhоlding, а mеаsurе thаt cаn hеlp prеvеnt tаx frаud. By аdоpting thеsе аpprоаchеs, businеssеs cаn rеducе thе risk оf cоstly pеnаltiеs аnd еstаblish strоng rеlаtiоnships with tаx аuthоritiеs. |
| Keywords: | tax fraud, compliance, VAT fraud, internal controls, tax advisors, advanced technologies |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:smo:raiswp:0557 |
| By: | Mohamed Safouane Ben Aıssa (University of Tunis ElManar); Firas Nfikha (University of Tunis ElManar) |
| Abstract: | We evaluate the transmission of monetary policy in an economy characterized by heterogeneous households and a sizable informal sector. We construct a consumption-based measure of informality at the household level which we use to estimate the Informality Engel Curve. The results are then reproduced endogenously in a dual-sector Heterogeneous Agent New Keynesian (HANK) Model. We test the effects of informality across different model specifications and at different informal sector sizes and then estimate the model’s dynamics for the Tunisian economy using the Bayesian method in a novel framework. Our results reveal that: (i) Monetary shocks from our HANK model are stronger and more effective, in terms of sacrifice ratio, than in other specifications, but within our model, the prevalence of informality dampens transmission and increases its cost. (ii) Accounting for informality doesn’t appear to undermine the transmission of monetary shocks in Tunisia but restrictive policy favors the expansion of the informal sector and affects informal workers the least. (iii) Wealth remains the primary factor influencing household responses to monetary shocks, but employment status is particularly significant among lower-wealth households. |
| Date: | 2025–12–19 |
| URL: | https://d.repec.org/n?u=RePEc:erg:wpaper:1820 |
| By: | Amirah El-Haddad (German Institute of Development and Sustainability (IDOS)Author-Name: Chahir Zaki; University of Orléans and Laboratoire d'Economie d''Orléans) |
| Abstract: | We use household enterprise data from the Egypt Labor Market Panel Surveys (ELMPS) in 1998, 2006, 2012, 2012 and 2023 to track the state of household micro and small enterprises (MSEs), particularly considering the enactment of the new micro, small, and medium enterprise (MSME) law in 2020. In 2023, we find that the sector continues to be dominated by informal, male-owned microenterprises. It also exhibits limited diversification and sophistication. There has been a trend toward informalization. Despite numerous initiatives and reforms in the institutional and regulatory environment, MSEs remain heavily self-financed. These characteristics suggest that the sector functions more as a 'survival sector' or a last-resort employer rather than as a competitive, high-tech and high-value one. With the challenges facing the sector and barriers to entry into the formal sector, this sector is the only way to earn a living for many people. |
| Date: | 2025–05–20 |
| URL: | https://d.repec.org/n?u=RePEc:erg:wpaper:1772 |
| By: | Amarante, Verónica |
| Abstract: | En las últimas décadas, los sistemas de monotributo han supuesto una innovación significativa en lo que respecta a los esfuerzos de expansión de los sistemas de protección social para los trabajadores independientes de América Latina. Asimismo, estos sistemas se han destinado, aunque en menor medida, a la reducción de la informalidad. Estos regímenes, que agrupan en un único pago simplificado las obligaciones tributarias y las contribuciones a la seguridad social, han surgido como respuesta a una realidad estructural de la región: la elevada proporción de trabajadores independientes que ejercen su actividad al margen de los sistemas formales de tributación y protección social. En el presente documento se examinan las experiencias relacionadas con el monotributo en la Argentina, el Brasil, Colombia y el Uruguay, y se analizan sus características, evolución, resultados e impactos. Se adopta una perspectiva comparada para identificar los factores críticos de diseño e implementación que determinan sus posibilidades de éxito y los aprendizajes para el futuro de estas políticas en la región. |
| Date: | 2025–11–20 |
| URL: | https://d.repec.org/n?u=RePEc:ecr:col022:83888 |