Tax Reform in Georgia and the Size of the Shadow Economy
This paper applies three different methods widely used in the literature to track changes in shadow economic activity in Georgia following a drastic tax reform in 2005. The first method is a currency demand approach based on macro level data. The second and third methods rely on micro data from household surveys. Overall, we find evidence that the amount of income underreporting decreased in the years following the reform. The biggest change is observed for households headed by a farmer, followed by "other" types of households where the head does not report any working status. Employed and self-employed households appear very similar before the tax reform and show minimal adjustment in income reporting in the post-reform period. Results, however, suggest that much of any difference may have come from increased enforcement efforts rather than rate changes.
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| Length: | 43 pages |
| Date of creation: | Oct 2012 |
| Handle: | RePEc:iza:izadps:dp6912 |
| Contact details of provider: | Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany Phone: +49 228 3894 223 Fax: +49 228 3894 180 Web page: http://www.iza.org
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References listed on IDEAS
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- Panayiota Lyssiotou & Panos Pashardes & Thanasis Stengos, 2004. "Estimates of the black economy based on consumer demand approaches," Economic Journal, Royal Economic Society, vol. 114(497), pages 622-640, 07.
- David E. A. Giles & Betty J. Johnson, 1999.
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Econometrics Working Papers
9910, Department of Economics, University of Victoria.
- David E. A. Giles & Betty J. Johnson, 2000. "Taxes, Risk-Aversion, and the Size of the Underground Economy: A Nonparametric Analysis With New Zealand Data," Econometrics Working Papers 0006, Department of Economics, University of Victoria.
- Lindsay M. Tedds, 2004. "Nonparametric expenditure-based estimation of income under-reporting and the underground economy," Department of Economics Working Papers 2004-17, McMaster University.
- Ann-Sofie Kolm & Søren Bo Nielsen, 2008. "Under-reporting of Income and Labor Market Performance," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(2), pages 195-217, 04.
- Kolm, Ann-Sofie & Nielsen, Søren Bo, 2005. "Under-reporting of Income and Labor Market Performance," Research Papers in Economics 2005:5, Stockholm University, Department of Economics.
- Kolm, Ann-Sofie & Nielsen, Søren Bo, 2007. "Under-reporting of income and Labour Market Performance," Working Papers 10-2007, Copenhagen Business School, Department of Economics.
- Trandel, Greg & Snow, Arthur, 1999. "Progressive income taxation and the underground economy," Economics Letters, Elsevier, vol. 62(2), pages 217-222, February.
- Edgar L. Feige, 2004. "How Big IS the Irregular Economy?," Macroeconomics 0404005, EconWPA.
- Cebula, Richard, 1996. "An Empirical Analysis of the Impact of Government Tax and Auditing Policies on the Size of the Underground Economy: The Case of the United States, 1973-94," MPRA Paper 49810, University Library of Munich, Germany. Full references (including those not matched with items on IDEAS)
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