The Hidden Economy and the Tax-Gap in New Zealand: A Latent Variable Analysis
This paper develops a structural, latent variable, model for the hidden economy in New Zealand, and a separate currency-demand model. The latent variable model is used to generate an historical time-series index of hidden economic activity, which is calibrated via the information from the currency-demand model. The hidden economy varies between 6.8% and 11.3% of measured GDP. This, in turn, implies that the tax-gap is of the order of 6.4% to 10.2% of total tax liability in that country.
|Date of creation:||03 Jun 1998|
|Note:||ISSN 1485-6441. This paper was also released as UVic Discussion Paper 97-08 in April 1997, and a longer preliminary version was released as N.Z. Inland Revenue Department Working Paper 5a, November/December 1996. The final version of this paper is now available as vicewp:9905.|
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