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Undercover economy refers to business transactions that do not follow policies and regulations of the government, whether these policies are about taxation or fixed pricing. Further, most businesses that engage in undercover economy have no license; they pay their workers in…
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Download file to see previous pages It is important to note that this business is not restricted to a particular group of individual since any person can engage in it. For instance, a person operating a small candy shop who has not been licensed is participating in an undercover economy because he or she is not willing to pay taxes on income received from business sales. Additionally, it is very difficult to approximate what percentage of a country’s economy is undercover but it has been argued that capitalistic countries like United States of America have a smaller undercover economy compared to socialistic countries like Russia (Pascale 2010). When people evade paying their taxes, it is dangerous to the economy. If people do not engage in a cash transaction activity, their money in the bank does not get work as disbursed due to the undercover economy, then that capital does not account for anything thus having zero impact to the individual and to the larger economy.
The underlying assumptions are that a person engages in undercover economy in order to tame the increasing costs of living due to inflation and stagnant salaries. Most of this people live in rural areas and some are not aware that they participating in undercover economy. In most cases, big firms are the ones that escape stringent policies set by the government because they tend to pay high taxes than any other business. There is no distinction between transparency and undercover economy in the government and business sector. Government and big businesses usually play games with taxpayers’ funds.
The secondary claims in this article is that undercover economy is beneficial to the individual since he or she is in a position to use more money to fund his or her activities. However, the undercover economy greatly affects the nations GDP because there is no enough capital to fund government projects and ...Download file to see next pagesRead More
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