Proceedings of the 5th International Conference on Advanced Research in Management, Economics and Accounting
Year: 2023
DOI:
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Shadow Economy In Türkiye: Impacts and Solutions
Burcu Yengil Bülbül
ABSTRACT:
The underground economy, also known by different terms such as the shadow economy, hidden economy, or informal economy, can be briefly defined as economic activities that operate outside the control of the government. Interest in this issue first began in 1936 following legal regulations in France. As governments increase their share of revenue from the economy in the form of taxes, economic entities seek to continue their activities without oversight in an unlawful manner. While taxes play an important role in the emergence of the shadow economy, other factors such as high inflation, income inequality, and distrust in authorities also contribute to its growth. The fact that this issue is considered a problem and remains unresolved keeps it relevant. The substantial portion of GDP originating from the shadow economy can create challenges for economic policies. In Turkey, economic factors, especially taxes, have an important impact on the shadow economy. In 2021, the share of tax revenue in GDP was determined to be 22.82% (OECD, 2021). Each country has its own strategies for combating the shadow economy based on its social and economic conditions. In this study, factors contributing to the shadow economy in Türkiye and planned measures by the government are discussed.
keywords: Informal Economy, Shadow Economy, Tax Rates