IDEAS home Printed from https://ideas.repec.org/a/aiy/jnljtr/v6y2020i1p36-53.html
   My bibliography  Save this article

Intersectoral Shadow Economic Linkages and their Impact on Tax Evasion

Author

Listed:
  • Dmitry Yu. Fedotov
  • Ekaterina N. Nevzorova

Abstract

The article discusses shadow economic linkages between companies from different sectors. The research hypothesis is that the multiplier effect can cause a spillover of the shadow economy from one sector to another through business connections between companies. The research methodology comprises, first, a correlation analysis of the indicators reflecting the level of informal activities in the key industries of Russia in 2011–2017; second, analysis of input-output tables to reveal the patterns inherent to intersectoral financial flows that involve sectors with a large share of shadow activities; and, third, analysis of the tax ratio in the key sectors in the given period. The correlation analysis of Rosstat’s adjustment of gross value added for informal economic activities and the share of undocumented workers employed in the total number of workers in the sector has revealed a strong correlation between these indicators. It was found that such sectors as real estate, agriculture and forestry, construction, trade and hotel industry have shadow economies exceeding the average level in the country. We used the input-output balance data to reveal the close connections between the sectors with a large share of shadow activities and other sectors. Our calculations have brought to light an increase in the share of illicit transactions in some industries due to interactions with shadow sectors. This trend was particularly characteristic of such industries as transport and communications, education, health care and social services. It was also found that the tax ratio for transactions involving companies from sectors with a large share of shadow activities tended to decline due to tax evasion. These research results can be used by tax authorities to detect and monitor economic operations associated with high tax evasion risks.

Suggested Citation

  • Dmitry Yu. Fedotov & Ekaterina N. Nevzorova, 2020. "Intersectoral Shadow Economic Linkages and their Impact on Tax Evasion," Journal of Tax Reform, Graduate School of Economics and Management, Ural Federal University, vol. 6(1), pages 36-53.
    • Handle: RePEc:aiy:jnljtr:v:6:y:2020:i:1:p:36-53
    DOI: http://dx.doi.org/10.15826/jtr.2020.6.1.074
    as

    Download full text from publisher

    File URL: https://jtr.urfu.ru/fileadmin/user_upload/site_15907/main/Fedotov_Nevzorova.pdf
    Download Restriction: no
    File URL: https://libkey.io/http://dx.doi.org/10.15826/jtr.2020.6.1.074?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Leandro Medina & Mr. Friedrich Schneider, 2018. "Shadow Economies Around the World: What Did We Learn Over the Last 20 Years?," IMF Working Papers 2018/017, International Monetary Fund.
    2. repec:rnp:smmscn:s18417 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hana Zídková & Spyros Papadakis & Markéta Arltová & Ioannis Lomis & Anna Christou, 2025. "How Important is the Structure of the EU Economy to the VAT Collection?," Prague Economic Papers, Prague University of Economics and Business, vol. 2025(1), pages 1-25.
    2. Christou Anna & Eriotis Nikolaos & Lomis Ioannis & Papadakis Spyros & Thalassinos Eleftherios, 2021. "The Greek VAT Gap: The Influence of Individual Economic Sectors," European Research Studies Journal, European Research Studies Journal, vol. 0(4 - Part ), pages 851-882.
    3. Elham Taheri & Salih KatircioÄŸlu & Ayhan Tecel, 2024. "Gender Differences in the Impact of the Informal Economy on the Labor Market: Evidence From Middle Eastern Countries," Evaluation Review, , vol. 48(5), pages 865-892, October.
    4. repec:ers:journl:v:xxiv:y:2021:i:4b:p:851-882 is not listed on IDEAS
    5. Yu.E. Labunets & I.A. Mayburov, 2020. "Relationship of Tax Burden and Firm Size in the Timber Industry in Russia," Journal of Applied Economic Research, Graduate School of Economics and Management, Ural Federal University, vol. 19(4), pages 458-487.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Diogo G. C. Britto & Alexandre Fonseca & Paolo Pinotti & Breno Sampaio & Lucas Warwar, 2022. "Intergenerational Mobility in the Land of Inequality," CESifo Working Paper Series 10004, CESifo.
    2. Nina Nikolova & Shteryo Nozharov, 2020. "Shadow Economy and Populism – Risk and Uncertainty Factors for Establishing Low-Carbon Economy of Balkan Countries (Case Study for Bulgaria)," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 121-144.
    3. KOUAKOU, Dorgyles C.M. & YEO, Kolotioloma I.H., 2023. "Can innovation reduce the size of the informal economy? Econometric evidence from 138 countries," MPRA Paper 119264, University Library of Munich, Germany.
    4. Franz Seitz & Lucas Devigne & Raymond de Pastor, 2022. "Different Motives for Holding Cash in France: an Analysis of the Net Cash Issues of the Banque de France," Working papers 888, Banque de France.
    5. Colin C. Williams, 2023. "A Modern Guide to the Informal Economy," Books, Edward Elgar Publishing, number 18668, December.
    6. Damir Stijepic, 2021. "A cross-country study of skills and unemployment flows," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 55(1), pages 1-30, December.
    7. Rua, António, 2018. "Modelling currency demand in a small open economy within a monetary union," Economic Modelling, Elsevier, vol. 74(C), pages 88-96.
    8. Reda Cherif & Fuad Hasanov & Philippe Aghion, 2023. "Fair and inclusive markets: Why dynamism matters," Global Policy, London School of Economics and Political Science, vol. 14(5), pages 686-701, November.
    9. Andreev A.S. & Andreeva O.V. & Bondareva G.V. & Osyak V.V., 2018. "Understanding the Underground Economy," European Research Studies Journal, European Research Studies Journal, vol. 0(Special 2), pages 814-822.
    10. Céline Antonin & Mattia Guerini & Mauro Napoletano & Francesco Vona, 2019. "Italy : escaping the high-debt and low-growth trap," Documents de Travail de l'OFCE 2019-07, Observatoire Francais des Conjonctures Economiques (OFCE).
    11. World Bank, 2021. "Mozambique - Country Economic Memorandum," World Bank Publications - Reports 37525, The World Bank Group.
    12. Hyland,Marie Caitriona & Islam,Asif Mohammed & Muzi,Silvia, 2020. "Firms' Discriminatory Behavior, and Women's Employment in the Democratic Republic of Congo," Policy Research Working Paper Series 9224, The World Bank.
    13. Natalie A. Carlson, 2023. "Differentiation in microenterprises," Strategic Management Journal, Wiley Blackwell, vol. 44(5), pages 1141-1167, May.
    14. Ndoya, Hermann & Okere, Donald & Belomo, Marie laure & Atangana, Melissa, 2023. "Does ICTs decrease the spread of informal economy in Africa?," Telecommunications Policy, Elsevier, vol. 47(2).
    15. Petranov, Stefan & Georgieva, Liliana & Ivcheva, Radostina, 2022. "Институционалните Условия За Членство В Еврозоната И Защо Пътят Е По-Важен От Неговата Цел [The institutional conditions for eurozone membership and why the path is more important than the destinat," MPRA Paper 115892, University Library of Munich, Germany.
    16. Alba, Carlos & McKnight, Stephen, 2022. "Laffer curves in emerging market economies: The role of informality," Journal of Macroeconomics, Elsevier, vol. 72(C).
    17. Ligita Gasparėnienė & Rita Remeikienė & Colin C. Williams, 2022. "Unemployment and the Informal Economy," SpringerBriefs in Economics, Springer, number 978-3-030-96687-4, September.
    18. Friedrich Schneider & Mangirdas Morkunas & Erika Quendler, 2021. "Measuring the Immeasurable: The Evolution of the Size of Informal Economy in the Agricultural Sector in the EU-15 up to 2019," CESifo Working Paper Series 8937, CESifo.
    19. Denise P. Lozano Lazo & Alexandros Gasparatos, 2019. "Sustainability Transitions in the Municipal Solid Waste Management Systems of Bolivian Cities: Evidence from La Paz and Santa Cruz de la Sierra," Sustainability, MDPI, vol. 11(17), pages 1-34, August.
    20. Aga,Gemechu A. & Campos,Francisco Moraes Leitao & Conconi,Adriana & Davies,Elwyn Adriaan Robin & Geginat,Carolin, 2021. "Informal Firms in Mozambique : Status and Potential," Policy Research Working Paper Series 9712, The World Bank.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aiy:jnljtr:v:6:y:2020:i:1:p:36-53. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Natalia Starodubets (email available below). General contact details of provider: https://edirc.repec.org/data/seurfru.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.