Formalizing the Shadow Economy in Serbia : : Policy Measures and Growth Effects.

• Superior document: Contributions to Economics Series
• Author: Krstić, Gorana.
• TeilnehmendeR: Schneider, Friedrich.
• Place / Publishing House: Cham : : Springer International Publishing AG,, 2015.; {copy}2015.
• Year of Publication: 2015
• Edition: 1st ed.
• Language: English
• Series: Contributions to Economics Series
• Physical Description: 1 online resource (182 pages)

Table of Contents

Intro -- Preface -- Contents -- Contributors -- Chapter 1: Introduction -- 1.1 Introduction -- Reference -- Chapter 2: The Shadow Economy: Challenges to Economic and Social Policy -- 2.1 Features of the Shadow Economy -- 2.2 Brief History of the Shadow Economy in Serbia -- References -- Chapter 3: The Concept of the Survey of Businesses and Entrepreneurs Operating Informally -- 3.1 Aim and Content of the Survey -- 3.2 Research Methodology -- 3.2.1 Definition of `Shadow Economy ́Used in the Survey -- 3.2.2 Sample -- 3.3 Basic Information on the Business Entities Surveyed -- References -- Chapter 4: Causes of the Shadow Economy -- 4.1 Causes of the Shadow Economy Rooted in the Tax System -- 4.1.1 The Size of the Tax Burden -- 4.1.2 The Fiscal Burden on Labour -- 4.1.3 The Social Welfare System -- 4.1.4 The Efficiency of the Tax Administration in Collecting Taxes -- The Shadow Economy and Use of State Services Free of Charge -- 4.1.5 The Penalties for Tax Evasion -- 4.1.6 The Probability of Sanctions -- 4.1.7 The Structure of the Tax System -- 4.1.8 The Complexity of the Tax System -- 4.1.9 The Fairness of the Tax System -- 4.1.10 Tax Compliance Costs -- 4.2 Labour Market Institutions as an Incentive to the Shadow Economy -- 4.2.1 Minimum Wage -- 4.2.2 Working Hours -- 4.2.3 Employment Protection Legislation -- 4.2.4 Unemployment Benefits -- 4.2.5 Retirement Rules -- 4.3 Other Institutional and Economic Causes of the Shadow Economy in Serbia -- 4.3.1 Low Productivity -- 4.3.2 Economic Crisis and Widespread Lack of Liquidity -- 4.3.3 Inefficient Market Exit -- 4.3.4 High Administrative Burden -- 4.3.5 Poor Regulatory Environment and Legal Insecurity -- 4.3.6 Construction Permit Issues for Existing Buildings (`Legalisation)́ and New Construction -- 4.3.7 Quality of Public Services -- 4.3.8 High Levels of Corruption.

4.3.9 High Tolerance for the Shadow Economy by the Government -- 4.3.10 Large Number of Small Business Entities -- 4.3.11 The Structure of the Populationś Income -- 4.3.12 A High Unemployment Rate -- 4.3.13 Tax Morality -- 4.4 Incentives from the Financial Sector -- 4.4.1 Cash Transactions -- 4.4.2 Informal Finance -- 4.4.3 Unregistered Remittances Sent by Migrants from Abroad -- References -- Chapter 5: What Is the Extent of the Shadow Economy in Serbia? -- 5.1 Introduction -- 5.2 Estimate of the Shadow Economy Using the MIMIC Method -- 5.2.1 Introduction -- Definition of the Shadow Economy -- 5.2.2 The MIMIC Model Approach -- 5.2.3 Econometric Results and Their Interpretation -- 5.3 Estimate of the Shadow Economy Using the Household Tax Compliance Approach -- 5.4 Estimate of the Shadow Economy Based on the Survey on Conditions for Doing -- 5.4.1 Business in Serbia -- 5.4.2 Estimated Extent of the Shadow Economy in the Trade in Goods -- 5.4.3 Estimated Extent of the Shadow Economy in the Payment of Wages -- 5.4.4 Summary Estimate of the Shadow Economy in the Sector of Businesses and Entrepreneurs -- 5.5 Estimate of the Tax Evasion Gap -- 5.5.1 Introduction -- 5.5.2 Estimate of the VAT Gap -- 5.5.2.1 Estimating the VAT Gap Based on Macroeconomic Aggregates -- Methodology for Estimating the VAT Gap -- Estimation of the VAT Gap in Serbia -- The VAT Gap and Registered GDP -- 5.5.3 Estimated Personal Income Tax and Social Security Contributions Gap -- Shadow Economy, Tax Evasion, and the Tax Gap -- Appendix -- References -- Chapter 6: Shadow Economy in the Business and Entrepreneurial Sectors -- 6.1 Assessment of Main Types of the Shadow Economy and Their Characteristics -- Definition of the Shadow Economy and Informal Employment in the Survey on Conditions for Doing Business in Serbia -- 6.2 Determinants of Participation in the Shadow Economy.

6.3 Effects of Competition from the Informal Sector -- 6.3.1 Competition from the Informal Sector -- 6.3.2 Effects of Competition from the Informal Sector -- 6.3.3 Types of Informal Operation -- References -- Chapter 7: Effects of Formalisation of the Shadow Economy -- 7.1 Fiscal Implications of Formalisation of Shadow Economy -- 7.1.1 Estimate of Possible Fiscal Effects with Respect to VAT -- 7.1.2 Estimate of Possible Fiscal Effects with Respect to Personal Income Tax and Social Contributions -- 7.2 Effects of Formalising the Shadow Economy on Economic Growth -- References -- Chapter 8: Analysis of the Administrative Capacity of the Institutions in Charge of Overseeing the Operations of Business Enti... -- 8.1 Introduction -- 8.2 Tax Administration -- 8.3 Labour Inspection -- 8.4 Market Inspection -- References -- Chapter 9: Main Findings and Recommendations -- 9.1 Main Findings -- 9.1.1 Causes of the Shadow Economy -- 9.1.2 Estimates of the Extent of the Shadow Economy and Tax Gap -- 9.1.3 The Shadow Economy in the Business and Entrepreneur Sector -- 9.1.4 Estimated Impact of Formalising the Shadow Economy -- 9.1.5 The Administrative Capacity of Institutions Tasked with Overseeing Business: Labour Inspectorate, Market Inspectorate, a... -- 9.2 Recommendations for Formalising the Shadow Economy -- 9.2.1 Strategy for Formalising the Shadow Economy -- 9.2.2 Fiscal Policy Measures -- Reducing Distortions Introduced by Taxes -- Reduce Tax Compliance Costs -- Reduce the Return to Tax Evasion -- Increase Tax Morals -- Reduce Tolerance for the Shadow Economy -- Encourage Taxpayers to Settle Reported Tax Liabilities Fully and on Time -- Abandon the Practice of Writing off Interest for Late Payment of Taxes -- Improve the Quality of Services Provided by the Government.

Educate the Public About the Importance and Value of Services Provided by the Government -- 9.2.3 Measures Relating to Features of the Labour Market -- Taxation of Labour -- Minimum Wage Regulation -- Working Hours Regulation -- Employment Protection Legislation -- Retirement Rules -- Welfare Benefits -- Specific Measures Targeting Informal Employment -- Recommendations for Improving the Efficiency of the Labour Inspectorate in Tackling Undeclared Work -- Recommendations for Improving the Efficiency of the Market Inspectorate in Tackling the Shadow Economy -- 9.2.4 Measures Relating to the Financial Sector -- Curb Transactions in Cash and Incentivise Cashless Payments -- Formalise Remittances from Abroad Transferred Through Informal Channels -- 9.2.5 Measures Related to the Business Environment -- Measures Aimed at Business Entities Operating Partially in the Shadow Economy -- Resolve the Issue and Consequences of `Phoenix Companies ́-- Impose Barriers to the Introduction of New Administrative Burdens by Requiring the Application of the SME Test and the Standar... -- Simplify Regulatory (Administrative) Requirements -- Regulate the Public Consultation Process -- Adopt Bylaws in a Timely Fashion -- Improved Protection from Unfair Competition -- Measures Directed at Business Entities Operating Wholly in the Informal Economy -- Establish an E-Portal for Licences, Permits, Approvals, and Consents -- Remove Barriers to Entry in Particular Sectors -- Establish an Authoritative Registry of Legislation Accessible to the Public Free of Charge -- Construction Permits and `Legalisation ́-- 9.2.6 Outreach Campaigns -- References -- Chapter 10: Executive Summary -- 10.1 Main Findings of the Study -- 10.1.1 Survey of the Informal Activities of Serbian Businesses and Entrepreneurs -- 10.1.2 Causes of the Shadow Economy.

10.1.3 Extent of the Shadow Economy in Serbia -- 10.1.4 Estimates of the Tax Evasion Gap -- 10.1.5 The Shadow Economy in the Business and Entrepreneur Sector -- 10.1.6 Effects of Formalising the Shadow Economy -- 10.2 Recommendations for Formalising the Shadow Economy -- 10.2.1 Fiscal Policy Measures -- 10.2.2 Measures Relating to Features of the Labour Market -- 10.2.3 Measures Relating to the Financial Sector -- 10.2.4 Measures Related to the Business Environment -- 10.3 Policy Conclusions -- References -- About the Author.