Saturday, May 26, 2018 | ePaper

How consumers and government can combat the shadow economy

  • Print
George Simon :
The shadow - or undeclared - economy costs national governments billions in tax revenue, with a major impact on the public purse. The EU Country Specific recommendations, due to be officially adopted on July 11, stress the importance of better fiscal management and the need to counter the shadow economy due to its burden on tax and public finances. Indeed, the latest EU Commission VAT Gap Study highlighted the extent of the problem, with around €160 billion lost in the EU in 2014. However public awareness of how to combat the shadow economy is not widespread.
A recent poll, conducted by IPSOS for Mastercard in ten Central and Eastern European countries[1], has found that while 81% of people want their governments to combat the shadow economy, many don't realise that their own shopping habits can make a big difference and that one of the greatest contributing factors is the passive shadow economy' where consumers engage in a legitimate transaction with sellers who then don't report it in order to avoid tax.
So how can we curb this? The most effective ways are to always ask for a receipt and/or by paying electronically.
Cash is one of the main culprits in the shadow economy as it reduces registration of transactions thus enabling tax avoidance. Electronic payments can counter this by guaranteeing that the transaction is registered but consumers are often not aware that cashless payments can decrease the shadow economy.
While 75% of people identified asking for receipts as a way of combating the shadow economy only 37% of people pointed to card payments as a solution.
Action is needed and it should come in the form of education and awareness-raising activities for consumers on (1) how greatly the shadow economy affects economic growth and spending on public services and (2) on how we as consumers can take steps to counter it. Simply asking for a receipt makes a difference but often we don't do it.
By combining this type of behavioural change with a move to a cashless society we can effectively counter undeclared transactions.
To enable this shift, investment and development of payment infrastructure is needed at both private and public level. It can facilitate not only the registering of transactions but also speed, reliability and security of payments and collection.
Whether it be paying utility bills or tax online or buying groceries at the supermarket, consumers have shown willingness towards this type of cashless transaction. Nearly 80% of respondents across the CEE region are eager to pay electronically more often and 86% would take receipts for each transaction
By raising awareness on how the shadow economy cycle affects the overall economy and our public services and working to empower and enable consumers to curb undeclared transactions the EU and national governments can work together with citizens to improve economic growth, fair competition and public services.
(George Simon is divisional president for Central Eastern Europe at Mastercard).

More News For this Category

Narcotics sale continues despite countrywide crackdown

NARCOTICS trade continues unabated at some of the hotspots in the capital with drug dealers continually changing their tactics in the face of the ongoing nationwide anti-drugs crackdown. The

Loan rescheduling facility must comply with banking laws

NEWS media reported that the commercial banks in 2017 waived Tk 1,753cr interest against bad loans which is blamed responsible for recurring bad loans in the country. Experts warned

Readers’ Forum

Healthcare for all :I do not know exactly how many countries in the world allow doctors who work for public hospitals to have their private practices. In Bangladesh, there

The new energy orchestra

Andrew Steer :As global leaders gather in Denmark and Sweden to discuss the future of clean energy, this is a good time to discuss the future of the world's

Green cities for a greener future

Anna Lisa Boni :Cities across Europe are committed to the transition to a greener, more sustainable and inclusive future by working with citizens and collaborating in partnerships.Urban areas are

Education as a key to solving conflicts

Stacia George :Those of us who work in peacebuilding pull out every tool in our toolbox to solve conflicts - we talk about infrastructure, jobs, agriculture, governance, and youth

Take action against stone miners for endangering biodiversity in hilly terrains

A NATIONAL daily on Thursday reported that unrestrained stone extraction in 200 streambeds across the Bandarban hill district jeopardized the livelihoods of 11 ethnic groups and extracted a toll on

Hasina`s India visit and getting water from Teesta

INDIA has kept talks on sharing of water of common rivers with Bangladesh stalled for over eight years holding back the signing of interim agreements on Teesta and Feni Rivers

Safety net to reduce poverty

Dr. M Abul Kashem Mozumder and  Dr. Md. Shairul Mashreque :There has been phenomenal growth of anti-poverty programs over the last couple of decades. Anti-poverty programs are wide ranging covering

Agricultural trade liberalization undermined food security

Jomo Kwame Sundaram and Anis Chowdhury :Agriculture is critical for achieving the Sustainable Development Goals (SDGs). As the Food and Agriculture Organization (FAO) notes, 'From ending poverty and hunger to