Economic sciences shadow economy in the Baltic states

Annotation

The article considers the problem and the main components of the shadow economy in the Baltic states. Various methods of combating the shadow economy in foreign countries are also considered.

Keywords: Shadow economy, tax evasion, envelope salary, combating the shadow economy.

Аннотация

Гжибовская Н.В., Ассоциированный профессор Доктор экономических наук Балтийская Международная Академия г. Даугавпилс Латвия

ТЕНЕВАЯ ЭКОНОМИКА В БАЛТИЙСКИХ ГОСУДАРСТВАХ

В статье рассматривается проблема и основные компоненты теневой экономики в странах Прибалтики. Также рассмотрены различные методы борьбы с теневой экономикой в зарубежных странах.

Ключевые слова: Теневая экономика, уклонение от налогов, зарплата в конвертах, борьба с теневой экономикой.

The shadow economy is a combination of economic activity in the economy of a certain state, which is outside the jurisdiction of tax, legislative and other control of competent authorities. The main reason for the development of this sector of economic activity is high taxes, various restrictions and a high level of corruption, because of which the business goes into the shadows, earning excess profit from current activities.

The “shadow” problem is relevant for all countries of the world due to the fact that the modern economy is unstable. Instability is associated with changes in the structure of the global economy itself.

In January 2018, a scientific study of the shadow economy's positions in 158 countries of the world was published by Leandro Medina and Friedrich Schneider under the auspices of the IMF, “Shadow Economies around the World: what did we learn over last 20 years?”. This is an actual analysis of the shadow economy as a multi-factor socio-economic structure, characteristic in different scales and forms for all states in the world without exception, but with significant quantitative differences in size and share in the national gross domestic product (GDP).

A study of the shadow economy was carried out using statistical data from 158 countries for the years 1991 - 2015. The total indicators of the share of the shadow economy in GDP for the group of developed countries have been brought to 2017. The generalized average indicator of its share in the world's GDP for almost a quarter century, amounting to 31.9%, is especially expressive. This means that approximately a third of all economic activity in the world is outside the official record with all the negative consequences, primarily for national economies and the standard of living of the population.[6]

There are noted four main types of the shadow economy's agents behavior in relations with the state: [1,178]

Income tax evasion and value added tax evasion, Avoiding compulsory social contributions, Failure to comply with state standards established for the production of certain types of products or services, Refusal of all forms of state accounting, including envelope salaries.

As for the European Union as a whole, we can say that the use of underground labor and tax evasion reaches about 19% of the total GDP of the entire European zone. But, despite this, the scale of the shadow economy can differ from each other. For example, the shadow economy of Central, Western and Northern Europe is at around 10%, in the Mediterranean - % of total GDP. And in Eastern and Southeastern Europe, the share of the shadow economy is able to reach a record of 30%. [2,14-19]

The Baltic states - Latvia, Lithuania and Estonia - as well as other states of the world are negatively affected by the level of the shadow economy on their effective development.

The dynamics of the share of the shadow economy in the GDP of these countries for the period 2009-2018 is shown in Picture 1. In order to calculate the size of the shadow economy as a percentage of GDP, the index includes calculations of unreported entrepreneurial income, unregistered or hidden employees, and unrevealed “envelope salaries”.

Picture 1. Shadow economy index in the Baltic States, % GDP [3]

As can be seen from the diagram, Latvia has the largest share of the shadow economy of GDP over the entire analyzed period.

Despite economic growth, the share of the shadow economy in Latvia in 2018 - compared with 2017 - increased by 2.2 percentage points or 10% (2.2 / 22 * 100%), amounting to 24.2% of GDP, The index compiled by the Riga Higher School of Economics indicates. In Lithuania, the share of the shadow economy is 18.7% of GDP, in Estonia - 16.7% of GDP.

In Lithuania, the “shadow” for the year increased by only 0.5, in Estonia it fell by 1.5 percentage points, which is + 2.75% and 8.2% respectively.

According to the study, in 2018, envelope salaries were the most significant component of the shadow economy in all three countries. In Latvia they amounted to 45.5% of the shadow economy, in Estonia and Lithuania - 54.5% and 41.7% respectively. [4] (Picture 2)

Picture 2. Components of the Shadow economy in 2018 in the Baltics

In annual statistical financial reports, entrepreneurs do not show the income received in Latvia at the level of 37.1%, in Estonia - 26.8% and the largest percentage in Lithuania - 40.5%. There are hopes that as a result of the tax reform in Latvia in the coming years the component of income hiding will decrease. But it is less likely that salaries in envelopes will decrease, as the reform introduced to solve this problem may not be effective enough, but time will tell. We must not forget about the component of employee non-image, especially in the context of a shortage of labor in the country and the possible flow of illegallabor associated with it, which could cause problems in The percentage of average wages (%) that the near future. entrepreneurs actually pay their employees but hide from the state is shown in Picture

Picture 3. The share of envelope salaries in the Baltic states, % [5]

The data presented show that the level of salary in envelopes for the analyzed period ranges from 12.2% in 2014 in Lithuania to 35.5% in 2010 in Latvia. Like the general level of the shadow economy in GDP, its main component - salary in envelopes - in Latvia exceeds these values of neighboring states.

Undoubtedly, combating the shadow economy is a difficult task compared to determining its scale. The main goal of the fight against the shadow economy is the legalization of the informal economy and the desire to eliminate the criminal. Since the shadow economy is influenced by many factors, the means of combating it must be complex. These means of struggle should include both economic, legal and social aspects.

In the state strategy to combat the shadow economy, the main task should be formulated: to what level it is possible to minimize the shadow economy, how to determine this level. First of all, this task must be realistic. After all, it is necessary to recognize that it is simply impossible to completely eliminate the shadow economy. An indicative parameter may be the share of the shadow economy, not exceeding 10% of GDP, but this reference should be supported by other arguments.

The main factor in crowding out shadow operations from the economy is the creation of a healthy competitive environment. After all, the shadow economy is a form of unfair competition.

But the question is what should be the behavior of the state: either it acts as an outside observer, or it becomes a factor of direct impact for any business entity of a market economy. The regulatory role of the state is crucial when it comes to the shadow economy.

A number of specific methods can be formulated to combat the shadow sector of the economy:

• minimization of corruption and bribery;

• fight against shadow operations of oligarchic structures;

• elimination of the main causes of the forced shadow economy;

• strengthening the power vertical, without which it is impossible to successfully deal with the shadow economy in the regions;

• formation of a healthy competitive environment. First of all, we are talking about equal "remoteness" of entrepreneurship from the government, sound tax policy, protection of property, etc.;

• state support for small and medium-sized businesses;

• socially oriented budget, which would contribute to lowering the level of forced illegal economy.

Literature

shadow economy competitive

1.Eriashvili N.D., Ekonomika i pravo. Tenevaya ekonomika : uchebnoe posobie / N.D. Eriashvili, G.M. Kaziahmedov, N.V. Artem'ev i dr.;pod red. N.D. Eriashvili, N.V. Artem'ev. - 3-e izd., pererab. i dop. - M. : Yuniti-Dana, 2015.-405 s. Ahmeduev A.SH. Organizatsionno-pravovoj mehanizm legalizatsii tenevoj ekonomiki//Biznes. Obrazovanie. Pravo. Vestnik Volgogradskogo Instituta biznesa: nauchnyj zhurnal. - 2015. - № 2. - 14-19.

2.Эриашвили Н.Д., Экономика и право. Теневая экономика: учебное пособие / Н.Д. Эриашвили, Г.М. Казиахмедов, Н.В. Артемьев и др. ; под ред. Н.Д. Эриашвили, Н.В. Артемьев. - 3-е изд., перераб. и доп. - М. : Юнити-Дана, 2015. - 405 с. (Eriashvili N.D., Ekonomika i pravo. Tenevaya ekonomika : uchebnoe posobie / N.D. Eriashvili, G.M. Kaziahmedov, N.V. Artem'ev i dr.;pod red. N.D. Eriashvili, N.V. Artem'ev. - 3-e izd., pererab. i dop. - M. : Yuniti-Dana, 2015.-405 s.)

3.Ахмедуев А.Ш. Организационно-правовой механизм легализации теневой экономики//Бизнес.Образование.Право. Вестник Волгоградского Института бизнеса: научный журнал. - 2015. - № 2. - 14-19. (Ahmeduev A.SH. Organizatsionno-pravovoj mehanizm legalizatsii tenevoj ekonomiki//Biznes. Obrazovanie. Pravo. Vestnik Volgogradskogo Instituta biznesa: nauchnyj zhurnal. - 2015. - № 2. - 14-19.)

4.Shadow economy index in the Baltic States. Journal of Comparative Economics. University of Technology, Sydney, Australia , Stockholm School of Economics in Riga, Riga, Latvia. Volume 43, Issue 2, May 2015, Pages 471-490.

5.Dati: SSE Riga Ilgtspejiga biznesa centrs. Enu ekonomika Baltijas valstis.

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