Taxing the Informal Economy: The Current State of Knowledge and Agendas for Future Research

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Joshi, Anuradha ; Prichard, Wilson ; Heady, Christopher J (2014)

This paper reviews the literature on taxation of the informal economy, taking stock of key debates\ud and drawing attention to recent innovations. Conventionally, the debate on whether to tax has frequently focused\ud on the limited revenue potential, high cost of collection, and potentially adverse impact on small firms. Recent\ud arguments have increasingly emphasised the more indirect benefits of informal taxation in relation to economic\ud growth, broader tax compliance, and governance. More research is needed, we argue, into the relevant costs and\ud benefits for all, including quasi-voluntary compliance, political and administrative incentives for reform, and\ud citizen-state bargaining over taxation.
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