Source: The Liberal Regional, 15/05/2009

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. It is what yesterday revealed the Brazilian Institute of Economics of the Getúlio Vargas Foundation (Ibre / FGV) and the Brazilian Institute of Competition Ethics (Etco).

The finding was made during the announcement of the Underground Economy Index, which measures the development of companies and activities involved in 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 is quarterly and started in 2003.

When presenting the results of the indicator, Ibre / FGV researcher Fernando de Holanda Barbosa Filho commented that, by observing the historical series, it is possible to perceive that the underground economy indicator goes “side by side” with the progress 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 the president of Etco, André Franco Montoro, many companies or small entrepreneurs have also chosen to abandon the formal market as a way of not paying 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.

In Montoro's assessment, part of the responsibility for advancing the shadow economy can be attributed to the government. "The index clearly shows that reducing the tax burden could be one of the public measures that could be taken to include (the underground economy) in the formal economy," he said. According to Montoro, studies show that, currently, the underground economy already represents around 20% to 30% of Brazil's GDP.