Research experts on countries that are transiting from one economic state to another (transition countries) and developing countries have claimed that a large part of economic activities were done within the shadow. In applying the estimation techniques for measuring underground economy for the period 1995–2008, the results indicated the size of shadow activities to be 35–44% of GDP for developing economies, 21–30% of GDP for the countries transiting from communist to capitalist economy (transition economies) and 14–16% of GDP for the Organization for Economic Co-operation and Development (OECD) economies. For advance economies, the value of underground activities grew from 7.9% of GDP in 1976 to about 16% in 2008. Since 2005, academic and political debate on development finance and development aid has raised the issue that shadow economy in countries worldwide is becoming larger than can be imagined, consequently, the need to be concerned about its composition.
THE SIZE OF THE TAX EVASION PROBLEMS ON SELF-EMPLOYMENT INCOME: AN EXAMINATION OF EFFECTS OF TAX POLICIES ON COMPLIANCE (Published)
Income tax evasion is a significant problem faced by most of the countries around the world. The phenomenon interferes with economic efficiency, socially desirable income distribution, long term economic growth, and price stability. Therefore, a reform strategy to increase tax compliance with a concerted, long term, coordinated, and comprehensive plan is required. It is also vital that tax administrators ensure that every compliance policy instrument at their disposal is use as effectively as possible. The intent of this study was to consider the implications of the increase of tax evasion which has been a source of big concern to policymakers. Issues, such as tax compliance costs and revenue maximizing taxation have also been analyzed. This paper pulls together the various strains of research to illustrate the current state of knowledge regarding the impacts of tax evasion on the economy and to identify areas in which additional research is particularly warranted.