Academic journal article The Journal of Social, Political, and Economic Studies

The Shadow Economy: An International Survey

Academic journal article The Journal of Social, Political, and Economic Studies

The Shadow Economy: An International Survey

Article excerpt

The Shadow Economy: An International Survey

Friedrich Schneider and Dominik H. Enste

Cambridge University Press, 2002

Shadow economies, comprising economic activity that is hidden from the eyes of the public and consequently capable of evading laws and governmental taxation, was not always illegal, originating traditionally in barter and the exchange of goods without involving monetary payments; but in the complexity of state regulation in the modern world it is most commonly illegal. In modern states, therefore, a shadow economy may arise from either of two causes: anti-social criminal activities such as those involving profit from fraud, drug dealing, extortion and similar activities that seek concealment from the authorities, and economic activities entered into in an attempt to evade overly severe fiscal and legal limitations imposed by governments. Those responsible for the former often seek to legitimize their profits by money laundering, while the latter often leads to the creation, as in India, of a dual currency - white money, on which taxes have been paid, and black money, on which taxes have not been paid. Thus, for example, property may change hands at an agreed price part of which is "white" money that can be recorded in the public records, and part "black" money, which never enters into the public records. Needless to say, black money normally trades at a discount. …

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