IDEAS home Printed from https://ideas.repec.org/a/aiy/jnljtr/v6y2020i1p36-53.html
   My bibliography  Save this article

Intersectoral Shadow Economic Linkages and their Impact on Tax Evasion

Author

Listed:
  • Dmitry Yu. Fedotov
  • Ekaterina N. Nevzorova

Abstract

The article discusses shadow economic linkages between companies from different sectors. The research hypothesis is that the multiplier effect can cause a spillover of the shadow economy from one sector to another through business connections between companies. The research methodology comprises, first, a correlation analysis of the indicators reflecting the level of informal activities in the key industries of Russia in 2011–2017; second, analysis of input-output tables to reveal the patterns inherent to intersectoral financial flows that involve sectors with a large share of shadow activities; and, third, analysis of the tax ratio in the key sectors in the given period. The correlation analysis of Rosstat’s adjustment of gross value added for informal economic activities and the share of undocumented workers employed in the total number of workers in the sector has revealed a strong correlation between these indicators. It was found that such sectors as real estate, agriculture and forestry, construction, trade and hotel industry have shadow economies exceeding the average level in the country. We used the input-output balance data to reveal the close connections between the sectors with a large share of shadow activities and other sectors. Our calculations have brought to light an increase in the share of illicit transactions in some industries due to interactions with shadow sectors. This trend was particularly characteristic of such industries as transport and communications, education, health care and social services. It was also found that the tax ratio for transactions involving companies from sectors with a large share of shadow activities tended to decline due to tax evasion. These research results can be used by tax authorities to detect and monitor economic operations associated with high tax evasion risks.

Suggested Citation

  • Dmitry Yu. Fedotov & Ekaterina N. Nevzorova, 2020. "Intersectoral Shadow Economic Linkages and their Impact on Tax Evasion," Journal of Tax Reform, Graduate School of Economics and Management, Ural Federal University, vol. 6(1), pages 36-53.
    • Handle: RePEc:aiy:jnljtr:v:6:y:2020:i:1:p:36-53
    DOI: http://dx.doi.org/10.15826/jtr.2020.6.1.074
    as

    Download full text from publisher

    File URL: https://jtr.urfu.ru/fileadmin/user_upload/site_15907/main/Fedotov_Nevzorova.pdf
    Download Restriction: no
    File URL: https://libkey.io/http://dx.doi.org/10.15826/jtr.2020.6.1.074?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Kyurdzhiev Sergey (Кюрджиев С.П.) & Peshkova Elena (Пешкова Е.П.) & Mambetova Alexandra (Мамбетова А.А.) & Kituykova Dariya (Китюкова Д.С.), 2018. "Determining Of The Scales Of Shadow Economy On The Basis Of Comparative Analysis Of Gdp And Volume Of Monetary Cash [Определение Масштабов Теневой Экономики На Основе Сравнительного Анализа Динамик," State and Municipal Management Scholar Notes, Russian Presidential Academy of National Economy and Public Administration, vol. 4, pages 96-101.
    2. Leandro Medina & Mr. Friedrich Schneider, 2018. "Shadow Economies Around the World: What Did We Learn Over the Last 20 Years?," IMF Working Papers 2018/017, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yu.E. Labunets & I.A. Mayburov, 2020. "Relationship of Tax Burden and Firm Size in the Timber Industry in Russia," Journal of Applied Economic Research, Graduate School of Economics and Management, Ural Federal University, vol. 19(4), pages 458-487.
    2. Christou Anna & Eriotis Nikolaos & Lomis Ioannis & Papadakis Spyros & Thalassinos Eleftherios, 2021. "The Greek VAT Gap: The Influence of Individual Economic Sectors," European Research Studies Journal, European Research Studies Journal, vol. 0(4B), pages 851-882.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ndoya, Hermann & Okere, Donald & Belomo, Marie laure & Atangana, Melissa, 2023. "Does ICTs decrease the spread of informal economy in Africa?," Telecommunications Policy, Elsevier, vol. 47(2).
    2. Ligita Gasparėnienė & Rita Remeikienė & Colin C. Williams, 2022. "Unemployment and the Informal Economy," SpringerBriefs in Economics, Springer, number 978-3-030-96687-4, April.
    3. Friedrich Schneider & Mangirdas Morkunas & Erika Quendler, 2021. "Measuring the Immeasurable: The Evolution of the Size of Informal Economy in the Agricultural Sector in the EU-15 up to 2019," CESifo Working Paper Series 8937, CESifo.
    4. Aga,Gemechu A. & Campos,Francisco Moraes Leitao & Conconi,Adriana & Davies,Elwyn Adriaan Robin & Geginat,Carolin, 2021. "Informal Firms in Mozambique : Status and Potential," Policy Research Working Paper Series 9712, The World Bank.
    5. Piotr Dybka & Bartosz Olesiński & Marek Rozkrut & Andrzej Torój, 2023. "Measuring the model uncertainty of shadow economy estimates," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 30(4), pages 1069-1106, August.
    6. Ahmad, Waqar & Hussain, Babar, 2023. "Fiscal Policy Effects on Shadow Economy: Empirical Evidence from Developing Countries," Asian Journal of Applied Economics, Kasetsart University, Center for Applied Economics Research, vol. 30(2), July.
    7. Anda David & Yoro Diallo & Björn Nilsson, 2023. "Informality and Inequality: The African Case," Journal of African Economies, Centre for the Study of African Economies, vol. 32(Supplemen), pages 273-295.
    8. Luc Jacolin & Joseph Keneck Massil & Alphonse Noah, 2021. "Informal sector and mobile financial services in emerging and developing countries: Does financial innovation matter?," The World Economy, Wiley Blackwell, vol. 44(9), pages 2703-2737, September.
    9. Phoebe W. Ishak & Mohammad Reza Farzanegan, 2022. "Oil price shocks, protest, and the shadow economy: Is there a mitigation effect?," Economics and Politics, Wiley Blackwell, vol. 34(2), pages 298-321, July.
    10. Adriana AnaMaria Davidescu & Tamara Maria Nae & Margareta-Stela Florescu, 2022. "Exploring the Moderation and Mediation Effects in Addressing the Main Determinants of Income Inequalities in Supporting Quality of Life: Insights from CEE Countries," IJERPH, MDPI, vol. 19(14), pages 1-28, July.
    11. Capasso, Salvatore & Ohnsorge, Franziska & Yu, Shu, 2022. "From Financial Development to Informality: A Causal Link," CEPR Discussion Papers 17565, C.E.P.R. Discussion Papers.
    12. E. Moreva L. & Е. Морева Л., 2018. "Неформальная экономика и инновации: contra et pro // Informal Economy and Innovation: Contra et Pro," Экономика. Налоги. Право // Economics, taxes & law, ФГОБУ "Финансовый университет при Правительстве Российской Федерации" // Financial University under The Government of Russian Federation, vol. 11(5), pages 38-47.
    13. Canh Phuc Nguyen & Su Dinh Thanh & Bach Nguyen, 2022. "Economic uncertainty and tourism consumption," Tourism Economics, , vol. 28(4), pages 920-941, June.
    14. Stephen Esaku, 2022. "Institutionalized democracy and the shadow economy in the short- and long-run: empirical analysis from Uganda," Palgrave Communications, Palgrave Macmillan, vol. 9(1), pages 1-12, December.
    15. Brian Micallef & Tiziana Gauci, "undated". "Excess demand for banknotes in Malta," CBM Policy Papers PP/02/2022, Central Bank of Malta.
    16. Bante, Jana & Helmig, Felix & Prasad, Lara & Scheu, Lea Deborah & Seipel, Jean Christoph & Senkpiel, Helge & Geray, Markus & von Schiller, Armin & Sebudubudu, David & Ziaja, Sebastian, 2021. "E-government and democracy in Botswana: Observational and experimental evidence on the effects of e-government usage on political attitudes," IDOS Discussion Papers 16/2021, German Institute of Development and Sustainability (IDOS).
    17. Livio Di Matteo & Thomas Barbiero, 2020. "Spend Less, Get More? Explaining Health Spending and Outcome Differences Between Canada and Italy," Review of Economic Analysis, Digital Initiatives at the University of Waterloo Library, vol. 12(4), pages 403-438, December.
    18. Adekunle Moruf Alabi & Mubarak Olatunji Lasisi & Maryam Abimbola Azeez, 2020. "The evolution of informal land use in a Nigerian market," Environment and Planning B, , vol. 47(5), pages 745-758, June.
    19. Brian Bell & Nicholas Bloom & Jack Blundell, 2021. "This time is not so different: income dynamics during the Covid-19 recession," POID Working Papers 012, Centre for Economic Performance, LSE.
    20. Raffaella Barone & Donato Masciandaro & Friedrich Schneider, 2022. "Corruption and money laundering: You scratch my back, i’ll scratch yours," Metroeconomica, Wiley Blackwell, vol. 73(1), pages 318-342, February.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aiy:jnljtr:v:6:y:2020:i:1:p:36-53. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Natalia Starodubets (email available below). General contact details of provider: https://edirc.repec.org/data/seurfru.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.