Informal economy ignores the crisis and grows 27,6% in twelve months (INN)


Source: DCI, 15/05/2009

RIO DE JANEIRO - Driven by the advance of the tax burden, which led to a real flight of companies in the formal market, the “underground” economy went unscathed by the worsening of the global crisis, and grew 27,6% from December 2007 to December 2008 This is what revealed the Brazilian Institute of Economics of the Getulio Vargas Foundation (Ibre / FGV) and the Brazilian Institute of Competition Ethics (Etco), when announcing the Underground Economy Index, which measures the development of companies and activities involved with the informal market , or in tax evasion practices. It was the strongest advance in a period from December to December of the historical series of the index, which started in 2003.

Informal data from the Brazilian Institute of Geography and Statistics (IBGE) were used to calculate the index, as well as information on monetary circulation from the Central Bank (BC).

When presenting the results of the indicator, Ibre / FGV researcher Fernando de Holanda Barbosa Filho commented that, when observing the historical series, it is possible to notice that the underground economy indicator goes “side by side” with the advancement of the economy formal. “We can see that, the greater the activity and the greater the GDP growth, the underground economy also grows together. (…) The two economies [formal and underground] are growing in parallel. One feeds the other. The income earned in the formal economy is spent in the underground economy, and vice versa ”, he said, explaining that the GDP increases also indicate an increase in currency circulation in the country.

However, the growth of the shadow economy cannot be explained only by the beneficial influence of the formal economy. For Etco's president, André Franco Montoro, many companies or small entrepreneurs have also chosen to abandon the formal market in order not to pay taxes. The institutions reported that, of the total growth rate of 27,6% of the index, 55,7% of the increase refers to the increase in the tax burden, which must have risen between 10% to 11% last year, according to data provided by Ibre / FGV.