What is the Underground Economy?
When government agencies calculate economic figures such as the Gross National Product (GNP), they rely on information gathered from legitimate income reports generated by companies, non-profit organizations and individual taxpayers. What these agencies cannot use in their economic forecasts, however, are the estimated billions of dollars in cash circulating through what is known as the “underground economy.” The underground economy includes income generated through illegal means, such as prostitution or gambling, as well as legitimate but cash-based activities such as online auctions or bartering services. The underground economy, also known as the shadow economy, has been in existence as long as its legitimate counterpart. The difference is that the government has any number of methods for tracking the exchange of goods, services and currency in an above-board economy, but very few ways of tracking the activities of an underground economy. Prostitutes, gamblers and others earning ill
You participate in the underground economy when you fail to declare income that would generally be taxable if you reported it to the tax authorities. It’s that simple. This may include things like: • not reporting a business activity (moonlighting); • not reporting part of a business activity (skimming); and • not reporting employment income (cash income). When you help others to avoid paying taxes, you support the underground economy. For example, if you agree to pay cash for a service in exchange for a better rate, then the service provider is probably not declaring that income.
As the access to this document is restricted, you may want to look for a different version under “Related research” (further below) or search for a different version of it. Publisher InfoArticle provided by M.E. Sharpe, Inc. in its journal Japanese Economy. Volume (Year): 34 (2007) Issue (Month): 2 (August) Pages: 7-19 Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF Handle: RePEc:mes:jpneco:v:34:y:2007:i:2:p:7-19 Contact details of provider: Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=110911 For technical questions regarding this item, or to correct its listing, contact: liame2(‘edu’,’bc’,’m7i7′,’baum’) (Christopher F. Baum). Related researchKeywords: StatisticsAccess and download statistics Did you know? IDEAS also indexes book chapters. This page was last updated on 2009-4-17.
