Taxation and the Shadow Economy : How the Tax System Can Stimulate and Enforce the Formalization of Business Activities
Cash transactions for goods and services in which no receipts are issued greatly increase the risk of tax evasion. Despite the availability of banking services and alternative payment, key sectors of the economy remain largely cash-based in almost...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2018
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/497071522428886160/Taxation-and-the-shadow-economy-how-the-tax-system-can-stimulate-and-enforce-the-formalization-of-business-activities http://hdl.handle.net/10986/29603 |
| Summary: | Cash transactions for goods and services
in which no receipts are issued greatly increase the risk of
tax evasion. Despite the availability of banking services
and alternative payment, key sectors of the economy remain
largely cash-based in almost all developing countries. This
paper shows the apparent strong negative correlation between
the use of electronic or formal payments and the size of the
shadow economy and reviews the approaches used by tax policy
makers and administrators to achieve better control of cash
transactions. It argues that the many new and sometimes
innovative approaches developed to support the formalization
of cash transactions will have little impact on the shadow
economy if applied in isolation. A successful strategy to
tax cash economy businesses and transactions requires a
holistic approach to compliance management in which
traditional monitoring and enforcement tools, such as
enabling tax administrations to access taxpayer data and
match information from various public and private sources,
play a key role. |
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