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Shadow Economy


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Presentation on my course paper about The development of shadow economy in the world

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Shadow Economy

  1. 1. The development of shadow economies in the world
  2. 2. Essence and structure of shadow economy <ul><li>The shadow economy includes all market-based legal production of goods and services that are deliberately concealed from public authorities </li></ul>
  3. 3. Essence and structure of shadow economy <ul><li>Reasons for participating in shadow economy: </li></ul><ul><li>to avoid payment of income, value added or other taxes, </li></ul><ul><li>to avoid payment of social security contributions, </li></ul><ul><li>to avoid having to meet certain legal labour market standards, such as minimum wages, maximum working hours, safety standards, etc., </li></ul><ul><li>to avoid complying with certain administrative procedures, such as completing statistical questionnaires or other administrative forms </li></ul>
  4. 4. Essence and structure of shadow economy Type of Activity Monetary Transactions Non Monetary Transactions ILLEGAL ACTIVITIES Trade in stolen goods; drug dealing and manufacturing; prostitution; gambling; smuggling and fraud Barter: drugs, stolen goods, smuggling etc. Produce or growing drugs for own use. Theft for own use. Tax Evasion Tax Avoidance Tax Evasion Tax Avoidance LEGAL ACTIVITIES Unreported income from self-employment; Wages, salaries and assets from unreported work related to legal services and goods Employee discounts, fringe benefits Barter of legal services and goods All do-it yourself work and neighbor help
  5. 5. Components of shadow economy
  6. 6. Causes of shadow economy <ul><li>taxes; </li></ul><ul><li>regulations; </li></ul><ul><li>prohibitions; </li></ul><ul><li>corruption. </li></ul>
  7. 7. Impacts on: <ul><li>Equity; </li></ul><ul><li>Market competition; </li></ul><ul><li>Tax system. </li></ul>
  8. 8. Recommendations for legalization: <ul><li>reducing the tax burden by systematic tax reforms </li></ul><ul><li>reducing the burden of contributions by reforming the social security systems </li></ul><ul><li>consolidating the public sector and making administrations more efficient </li></ul><ul><li>allocating transfer payments according to the principle of neediness </li></ul><ul><li>decreasing density of regulation </li></ul><ul><li>more flexibility instead of forced reduction of working time </li></ul>
  9. 9. <ul><li>Thank you for attention </li></ul>