Title: The underground economy and tax potential in developing countries: a comparative study of Indonesia and Russia
Authors: Aprilia Srikandi Manita; Khoirunurrofik
Addresses: Faculty of Economics and Business, Department of Economics, University of Indonesia (FEB UI), Jakarta, 10430, Indonesia ' Faculty of Economics and Business, Institute for Economic and Social Research (LPEM) and Department of Economics, University of Indonesia (FEB UI), Jakarta, 10430, Indonesia
Abstract: This study compares the underground economies of Indonesia and Russia, on the basis that the two countries are G20 members and are both transitional nations. The study uses the ordinary least squares (OLS) regression with a currency demand approach derived from the difference between a money demand economy in the period 2004-2015. The estimation results of the level of the underground economy compared to per capita GDP in Indonesia from 2004 to 2015 range from 25.76% to 32.53%, with an average of 28.65%, while those of Russia range from 12.74% to 26.19%, with an average of 18.79%. However, there is no empirical evidence that shows a significant impact of the tax amnesty policies in either country, so that the governments are advised to improve their strategies of generating tax revenue by making a follow-up policy with definite legal force.
Keywords: currency demand; underground economy; tax amnesty; sunset policy; tax potency.
International Journal of Trade and Global Markets, 2021 Vol.14 No.2, pp.187 - 196
Received: 08 Feb 2019
Accepted: 11 Nov 2019
Published online: 21 Mar 2021 *