Deterring participation in the informal economy

This chapter reviews the effectiveness of deterrence policy measures to dissuade participation in the informal economy. On the one hand, initiatives to improve the actual and/or perceived sanctions for those caught are reviewed, namely: sanctions to deter participation in the informal economy; sanctions to facilitate the transition to formality; sanctions applied to citizens or businesses who buy goods and services from the informal economy; non-compliance lists; sanctions that excluding non-compliant businesses from bidding for public procurement contracts and receiving subsidies and licenses, and naming and shaming lists. On the other hand, initiatives to increase the perceived or actual probability of detection are reviewed, namely: inspections of workplaces; registration of workers prior to first day at work; workplace identity cards; certification of business, certifying payments of social contributions and taxes; data collection, sharing and analysis to identify risky businesses; complaint reporting tools; notification letters, and supply chain responsibility initiatives.