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The underground economy and tax potential in developing countries: a comparative study of Indonesia and Russia

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  • Aprilia Srikandi Manita
  • Khoirunurrofik

Abstract

This study compares the underground economies of Indonesia and Russia, on the basis that the two countries are G20 members and are both transitional nations. The study uses the ordinary least squares (OLS) regression with a currency demand approach derived from the difference between a money demand economy in the period 2004-2015. The estimation results of the level of the underground economy compared to per capita GDP in Indonesia from 2004 to 2015 range from 25.76% to 32.53%, with an average of 28.65%, while those of Russia range from 12.74% to 26.19%, with an average of 18.79%. However, there is no empirical evidence that shows a significant impact of the tax amnesty policies in either country, so that the governments are advised to improve their strategies of generating tax revenue by making a follow-up policy with definite legal force.

Suggested Citation

  • Aprilia Srikandi Manita & Khoirunurrofik, 2021. "The underground economy and tax potential in developing countries: a comparative study of Indonesia and Russia," International Journal of Trade and Global Markets, Inderscience Enterprises Ltd, vol. 14(2), pages 187-196.
    • Handle: RePEc:ids:ijtrgm:v:14:y:2021:i:2:p:187-196
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