Population in the shadow market: petty corruption and unpaid taxes

Abstract

The subject matter of the article is a problem that is relevant for developing economies. A legal foundation for economy operation development is consolidated slowly; instead, an illegal flow of money and corruption the population gets actively involved into are expanding. According to official records, the number of unaccounted employees who avoid taxation has exceeded 15 million in Russia. When studying this phenomenon, researchers mainly refer to shadow economy whose scale and financial damage inflicted on the country are known. Population masses involved in the illegal flow of money operate in the shadows, since the latency of corruption processes makes it difficult to explore this phenomenon and invokes sociological methods along with economic methods. The purpose of the article is to show the structure of Russian population's involvement in the illegal cash flow turnover in terms of three aspects: presence in the shadow economy, involvement in corrupt practices, and concealment of a fraction of income aiming to non-payment of taxes. When solving these problems, the authors were to use the method of applied sociology with a subsequent transformation of aggregated information into empirical indicators by economic methods. Based on the research, the authors have explored the structure and motivation of the population to participate in the illegal flow of money, calculated the aggregate economic damage from all types of population incomes that are not undocumented by revenue authorities. By revealing the latent structure of the illegal cash flow, the research findings enable to more accurately plan priority directions of efforts to be made by fiscal bodies to neutralize the population participation in illegal economic and financial activities.

The interdependence between fiscal public policies and tax evasion

“…In most countries tax evasion is considered a threat with a major impact on the evolution of a country's economy by creating a major imbalance at the macroeconomic level (Luzgina, 2017;Osipov et al, 2018;Keliuotytė-Staniulėnienė, Mironenko, 2019). The importance of studying tax evasion derives from its effects.…”

Evolution of theories of shadow economy formation

“…Systematization of scientific expertise in the field of shadow economy emergence shows that over the past two decades, these issues have constantly been the subject of scientific interest. This is evidenced by a growing number of theoretically and empirically focused studies on various aspects of the shadow economy [12,13]. Today the scientific literature contains a significant variety of approaches to the interpretation of the essence, prere quisites for the formation and consequences of the existence of the shadow economy.…”

“…The phrase «nonobserved economy» has the lowest search frequency (less than 10). Phrases «shadow economy» (6-11), «informal eco nomy» (13-20), «underground economy» (7)(8)(9)(10)(11)(12)(13)(14)(15)(16)(17)(18)(19)(20). As a rule, the peak of discussion of the studied aspects falls at the end of the year (November-December).…”

Features of Tax Policy in Ukraine in the Context of European Integration

“…The method of synthesis solved the set research tasks through its application to primary sources on the subject. The application of the analytical method to the primary source data made it possible to make recommendations regarding the implementation of the national tax system to European legislation; identify the main areas of experience in tax policy reform and the conditions justifying the application of certain measures, the compliance of the international tax base with the specificities of national systems and EU tax law as a whole (Osipov et al, 2018;Tarasova et al, 2018). Methods of induction and deduction were used to analyse the content and structure of legislative texts, the characteristics of legal norms in the context of research topics.…”