Hungarian Government on the Whitening of the Economy Measures to Stabilize the Budget

The Hungarian government developed a package of tools for improving legal control and compliance for Hungarian companies and entered into force between 2012 and 2021. Part of this complex package of measures sought to broaden the tax base without raising taxes, while others sought to reduce the size of the black economy by reducing the amount of illegally available benefits. The level of compliance may increase, as inspections are continuous, the risk of failure is high, and compliance with legal actions does not require a large intellectual or financial expense from the taxpayer. Part of this package was the obligation to use online cash registers, the introduction of reverse charge VAT, the targeted reduction of VAT rates, the introduction of an electronic goods tracking and verification system, and the introduction of online invoicing.

Tax Enforcement in the Black Economy

The black economy—also called the hidden, covert, underground, grey, illicit, or cash economy—is used to describe the aspect of a country's economy that is not visibly subject to taxation. However, it is also a useful measure of behavioral disruption to the taxation system, as the scale and tactics of black economy participants vary over time. The purpose of this chapter is to suggest that existing tax policy (where legal constraints alone are used) is insufficient to affect black economy behaviour. It suggests that by adopting responses that are “more than law,” revenue administrations can deploy a more advanced and effective approach to improve tax compliance and can decrease the negative impacts of the black economy.

Wage-Increment and Development of Black Economy in Nigeria: Influences of Inflation and Taxation

Purpose: In this paper, wage-black economy relationship was examined while taking into consideration the influences of inflation and taxation. Approach/Methodology/Design: In particular, Value at Risk (VAR) approach was implemented using annually data for Nigeria covering the period 1990-2018 to assess the dynamic relationship among the variables. In light of national minimum wage in Nigeria, impulse response function was used to highlight the plausible responses from black economy to a shock of one standard deviation in each indicated variable. Findings: The result shows that a shock to national minimum wage (LOGMWA) will have a negative effect on black economy (LOGBEC) in Nigeria. Shocks to inflation (LOGINFL) will have a positive impact on black economy (LOGBEC). Shocks to tax (LOGATAX) will have asymmetric impacts on black economy (LOGBEC). The results were robust even when unemployment (LOGUEMP) was included. An unemployment shock was shown to enhance black economy in Nigeria. Practical Implications: The study is significant for the concerned authorities in Nigeria so that policy measures are taken and directed towards the causes that drive the black economy in the country. Originality/value: The impulse response function was estimated. It was estimated to show the plots of the responses from black economy (LOGBEC) to a one standard deviation shock in each indicated variable (national minimum wage (LOGMWA), inflation (LOGINFL), and tax (ATAX)). The shocks to national minimum wage (LOGMWA) will have a negative effect on black economy (LOGBEC) in Nigeria.

Book review: Kamal Nayan Kabra, The Black Economy in India: Transition to the Grey Political Economy

Kamal Nayan Kabra, The Black Economy in India: Transition to the Grey Political Economy. Delhi: Aakar Books, 2019, 273 pp., ₹895.

Book review: Saumen Chattopadhyay, Macroeconomic of the Black Economy

Saumen Chattopadhyay, Macroeconomic of the Black Economy, Delhi, India: Orient Blackswan Publisher, 2018, ₹666, 276 pp. (hardcover). ISBN: 978-93-5287-281-7.

Estimating the size of the black economy: new evidence from India

Purpose The issue of black economy has long been debated in India and it has been one of the key targets of policy action from last four decades. The debate is further fueled by demonetization of higher currency notes in the country. In this context, the purpose of this paper is to estimate the size of black economy in India for the period 1970–2017. Design/methodology/approach A currency demand approach is adopted for this purpose. The test of structure break indicates for a break in the system; therefore, the authors employ Johansen et al. (2000) cointegration test. For estimating the empirical model, the authors utilize fully modified ordinary least squares in a cointegration framework for taking care the endogeneity problem. Findings The estimates indicate that the Indian economy has a sizable black economy. In early 1970s, when the tax rate in India was significantly higher, the estimated black economy was above 30 percent of the official GDP. A variety of economic reforms including taxation, regulation and industrial licensing have drastically reduced the size to below 15 percent of official GDP in the last two decades. In the last estimated year (2017), the black economy was 23,849bn Indian rupees at current market price (around $400bn), which was 14 percent of the official GDP. Practical implications On the basis of the findings, the authors suggest some important fiscal, administrative and regulatory reforms to curb the generation of black economy in India. Originality/value The structural breaks can induce stochastic behavior similar to an integrated process, which makes it difficult to differentiate between the lack of cointegration and a structural shift. Thus, in the present study, the authors attempt to address this issue by incorporating the issue of structural break in the analysis. Furthermore, India is a cash-based economy; therefore, it is likely that currency-based models are more suitable. The application of advanced time-series techniques is likely to yield better and robust results.