Purpose – The main purpose of this paper is to explore size of the shadow economy of 31 European Countries in 2014 and size of the shadow economy of 28 European Union countries over 2003-2014 (in per cent of official GDP). An additional objective is to identify tax evasion, as the problem of all the EU countries, answering the questions how better combat the tax fraud. Design/methodology/approach – Estimates of the shadow economy for all 28 European Union countries and other three countries from Europe, i.e. Norway, Switzerland and Turkey – MIMIC method was applied. Findings – The average size of the shadow economy in 28 EU countries was 22.6 per cent in 2003 and decreased to 18.6 per cent (of official GDP) in 2014. We also consider the most important driving forces of the shadow economy. The biggest ones are with 14.6 per cent unemployment and self-employment, followed by tax morale with 14.5 per cent and GDP growth with 14.3 per cent. The proportion of tax evasion (accounting for indirect taxation and self-employment activities) was on average 4.2 per cent (of official GDP) in Poland, 1.9 per cent in Germany and 2.9 per cent in the Czech Republic. Research limitations/implications – The MIMIC statistics do not address a large part of the wholly illegal economy (of typically criminal nature) and, accordingly, it is not an absolute magnitude of the whole unofficial economy. However, it does not seem that other, alternative, methods of measuring the unofficial economy are better in individual terms. Practical implications – Current statistical research should lead to practical acceptance in the framework of need for developing better organizational & legal ways for multi-level governance within the European Union, leading to effective methods of counteracting – in particular intra-Union fraud. In addition, the presentation of a review of typology of the main theories and studies regarding the unofficial economy aspects relating to tax evasion constitutes a practical review of the pursued research areas. Social implications – Safeguarding the national economy as a whole, by seeking ways of reducing the scope of shadow economy. Originality/value – Both regarding presentation of the latest shadow economy estimates and typology of its main studies and theories.

Purpose The purpose of this paper is to present an up-to-date estimation of the tax gaps (TGs) of 35 countries (28 EU member states and 7 additional countries – Australia, Canada, Japan, New Zealand, Turkey, Switzerland and the USA, both as a percentage of the gross domestic product (GDP) and a nominal value (in US$). Design/methodology/approach The authors’ empirical study was carried out on 35 selected countries. To estimate the TG, indirect methodology has been applied, where the basic components used in the estimation procedure are the level of the shadow economy estimated with the multiple indicators multiple causes method, the GDP at current prices (in US$), the total tax rate (TTR) of a given country and the indirect method of follow-up and estimation of lacking data. Findings The basic finding of the research is that the level of the TG is determined individually for a given country and is strongly correlated with the GDP, i.e. if the GDP is high, the TG as the percentage of the GDP is lower in the majority of countries. It is particularly easily noticeable in countries such as the USA (TG – 3.8 per cent of the GDP), the Great Britain (TG – 3.2 per cent of the GDP) or Japan (TG – 4.3 per cent of the GDP). Research limitations/implications A limitation of the adopted research method is the lack of application of direct (supplementary) methods which would include potentially lost contributions from foreign sources and not registered taxpayers. Another research constraint is that the authors’ estimations do not take into account the so-called direct top-down approach based on the VAT Theoretical Total Liability. The weakness of the adopted procedure of estimation is also the use of TTR only instead of comparative approach including tax burdens and average tax rate. Practical implications TG has recently become a hotly debated issue and poses a big challenge to the public finance in many countries. The paper provides some recommendations for the policymakers how to reduce the size of the TG. Social implications Tax evasion and tax avoidance leading to the emergence and expansion of the TG erode the business ethics and distort the rules of fair competition, thus undermining the social trust and moral infrastructure of business transactions. Originality/value One of the major research findings is that 30 per cent of the TG in a given country is determined by the TTR, which – for the first time – provides empirical proof that tax policy (as part of overall economic policy) plays an important role and that it may determine the fiscal effectiveness of a given country.

Cultural intelligence underpins the interaction between firms and their cultural environments as the domain of external sources that are explored and utilized for innovation through absorptive capacity. This research seeks to answer the question of if and how cultural intelligence moderates the links between innovativeness and potential and realized absorptive capacity. We test our hypotheses based on data from 215 firms operating in Poland. We demonstrate that cultural intelligence strengthens the linkage between potential absorptive capacity and innovativeness that highlights cultural intelligence as an important enabler of exploring new and diverse external knowledge sources. We discuss cultural intelligence concept in relation to strategic management and reveal its contingent role in innovativeness.

The social and economic policy pursued by national and European authorities is supported by the redistribution of public funds. Choices made by European member states regarding the relevant scale of redistribution should promote the individual nation's sustainable development and competitiveness. Increased capital and workforce flows strengthen so-called fiscal and spending competition, which weakens governments' capacity for running an autonomous fiscal policy. In EU countries, however, there are still quite significant differences between the basic parameters of fiscal and spending systems, indicating that governments are not as powerless as is often claimed. Further, the fact that elements of fiscal policy have consequences for a country's competitiveness should not be overlooked. Keeping this in mind, the main purpose of this article is to examine to what extent EU member states' public spending can have a real impact on changing performance indicators for goals related to competitiveness and sustainable development. To this end, an approach based on panel models (individual vs. random effects) verified with a Hausman specification test was used. Our findings demonstrate the significant impact of an active spending policy on the indicators selected for analysis, i.e. indicators related to the stable development and competitiveness of EU member states within the period of 2008-2018. Our research results have also shown that to measure competitiveness there is a need to integrate a number of varied economic, social and innovative factors to analyze the growth potential of a particular country. In turn, our model studies demonstrate that countries where the fiscal deficit is below 3% of GDP can implement a sustainable development policy more effectively, thus promoting competitiveness, instead of the periodic shocks and budget cuts which accompany remedial processes and procedures to alleviate excessive deficits.

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