INTRODUCTION
In the past decades economy and its structure has developed sharply, finding new terms, new ways how people could spend or save their money. But at the same time a different part of our economy has also developed – shadow economy.
Nowadays shadow economy is a integral part of our economy. Shadow economy causes extremely high losses to the state budget, losses that are substantial to our country in this time of crisis. People will always find new ways how to evade taxes, and it that way increase their current assets. This is one of the biggest problems in economy nowadays.
The aim of this reaserch paper is to find out what is shadow economy and what role it has in the national economy.
To achieve the aim, the following tasks should be fulfilled:
1. Examine the theoretical basis of shadow economy.
2. Explore the share of shadow economy in Latvia.
3. Explore the share of shadow economy in Europe.
4. Find out what methods will be used, to fight against shadow economy.
Reached a conclusion that in Latvia shadow economy is growing sharply, and even the legal sanctions cannot prevent people from tax evasion.
1. SHADOW ECONOMY
1.1 Shadow economy – theoretical basis
There are many and many ways how to define shadow economy. But the most precise definition is : Shadow economy is untraceable, and hence untaxable, business dealings that are not reflected in a country’s gross domestic product (GDP) computations. In a another way you can say, that shadow economy is a cash based sistem in wich transactions records are kept in „number two” accounts (secret account books).
There are two sectors in shadow economy – the legal sector and the illegal sector. Legal sector deals with entrepreneurs that don’t pay part of their taxes or all of their taxes. It also deals with illegal production units and illegal employees. This is often found in construction and services industries. But the illegal sector is also a part of shadow economy. This sector deals with drug dealings, prostutition and contraband – actions that are forbidden with law. The illegal part of shadow economy is also called black economy.
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