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National accounts, fiscal rules and fiscal policy. Mind the hidden gaps

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  • Maurizio Bovi

    (ISAE - Institute for Studies and Economic Analyses)

Abstract

Underground activities affect crucial fiscal ratios generating “gaps” both in government revenues and in national accounts. I address this topic exploiting the peculiarities of the Italian situation. First, I describe the pros and cons of the Italian method to estimate the (non trivial share of) shadow economy. This sheds some light on the reliability of GDP estimates and allows unraveling some policy-relevant national accounts gaps. Second, I examine the links between undeclared incomes, tax burden and fiscal policy in a system possibly suffering from unpleasant arithmetic. Data suggest that government revenues and tax evasion go hand-in-hand and highlight the difficulties of policymaking.

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File URL: http://lipari.istat.it/digibib/Working_Papers/WP_76_2007_Bovi.pdf
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Bibliographic Info

Paper provided by ISTAT - Italian National Institute of Statistics - (Rome, ITALY) in its series ISAE Working Papers with number 76.

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Length: 32 pages
Date of creation: Jan 2007
Date of revision:
Handle: RePEc:isa:wpaper:76

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Keywords: Fiscal Rules; National Accounts; Shadow Economy; Taxation.;

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  1. Patrick J. Caragata, & David E. A. Giles, 1998. "Simulating the Relationship Between the Hidden Economy and the Tax Level and Tax Mix in New Zealand," Econometrics Working Papers 9804, Department of Economics, University of Victoria.
  2. Joel Slemrod & Shlomo Yitzhaki, 2000. "Tax Avoidance, Evasion, and Administration," NBER Working Papers 7473, National Bureau of Economic Research, Inc.
  3. Dominik H. Enste & Friedrich Schneider, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March.
  4. Maurizio Bovi, 2005. "Book-Tax Gap. An Income Horse Race," Public Economics 0506009, EconWPA.
  5. Tito Boeri & Pietro Garibaldi, 2006. "Shadow Sorting," Carlo Alberto Notebooks 10, Collegio Carlo Alberto.
    • Tito Boeri & Pietro Garibaldi, 2005. "Shadow Sorting," NBER Chapters, in: NBER International Seminar on Macroeconomics 2005, pages 125-163 National Bureau of Economic Research, Inc.
  6. Ihrig, Jane & Moe, Karine S., 2004. "Lurking in the shadows: the informal sector and government policy," Journal of Development Economics, Elsevier, vol. 73(2), pages 541-557, April.
  7. Simon Johnson & Daniel Kaufman & Andrei Shleifer, 1997. "The Unofficial Economy in Transition," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(2), pages 159-240.
  8. Boeri, Tito & Garibaldi, Pietro, 2002. "Shadow Activity and Unemployment in a Depressed Labour Market," CEPR Discussion Papers 3433, C.E.P.R. Discussion Papers.
  9. Bovi Maurizio, 2004. "The (Underground) Wealth of Nations," Politica economica, Società editrice il Mulino, issue 1, pages 117.
  10. Mills, Lillian F. & Plesko, George A., 2003. "Bridging the Reporting Gap: A Proposal for More Informative Reconciling of Book and Tax Income," National Tax Journal, National Tax Association, vol. 56(4), pages 865-93, December.
  11. Giuseppe Bertola & Pietro Garibaldi, 2003. "The Structure and History of Italian Unemployment," CESifo Working Paper Series 907, CESifo Group Munich.
  12. Maurizio Bovi, 2005. "The Dark, and Independent, Side of the Italian Labour Market," Labor and Demography 0504003, EconWPA.
  13. Jacques, Jean-François & Fugazza, Marco, 2004. "Labor market institutions, taxation and the underground economy," Economics Papers from University Paris Dauphine 123456789/1888, Paris Dauphine University.
  14. Carillo, Maria Rosaria & Pugno, Maurizio, 2004. "The underground economy and underdevelopment," Economic Systems, Elsevier, vol. 28(3), pages 257-279, September.
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