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Effects of Formalisation of the Shadow Economy

In: Formalizing the Shadow Economy in Serbia

Author

Listed:
  • Milojko Arsić

    (University of Belgrade)

  • Gorana Krstić

    (University of Belgrade)

Abstract

Based on the estimate of the tax evasion gap, this chapter looks at the benefits of a reduction in the shadow economy—or, rather, the reintegration of a portion of it into the formal economy—to the Serbian budget. We show separate estimates of possible fiscal effects for the three key types of public revenue for which we have estimated the tax gap: value added tax, personal income tax, and social security contributions. The chapter also considers how formalising the shadow economy affects economic growth. Although there is a large body of empirical research on the impact of the shadow economy on economic growth, there are still no unequivocal empirical and theoretical findings. The basic question is this: Is the shadow economy a positive phenomenon? In other words, does it make a positive contribution to economic growth? The answer to these questions result in two possible avenues of approach for government policy on the shadow economy: tolerance or active suppression.

Suggested Citation

  • Milojko Arsić & Gorana Krstić, 2015. "Effects of Formalisation of the Shadow Economy," Contributions to Economics, in: Gorana Krstić & Friedrich Schneider (ed.), Formalizing the Shadow Economy in Serbia, edition 127, chapter 0, pages 101-107, Springer.
    • Handle: RePEc:spr:conchp:978-3-319-13437-6_7
    DOI: 10.1007/978-3-319-13437-6_7
    as

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