Informal face the crisis and expand (Jornal do Commercio - PE)

By ETCO

Source: Jornal do Commercio - PE, 15/05/2009

RIO - 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 which revealed yesterday the Brazilian Institute of Economics of the Getúlio Vargas Foundation (Ibre-FGV) and the Brazilian Institute of Ethics in Competition (Etco), when announcing 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.


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, by 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 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 underground 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. The fact that the crisis did not shake the advance of the underground economy last year also caught the attention of researchers. Ibre / FGV researcher Samuel Pessoa explained that the decline in the supply of credit was one of the most damaging consequences of the global crisis within the formal economy, in the last quarter of last year. "But it hardly affected the shadow economy, because it doesn't use credit."

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Informal face the crisis and expand (Jornal do Commercio-PE)

By ETCO

Source: Jornal do Commercio - PE, 15/05/2009

RIO - 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 which revealed yesterday the Brazilian Institute of Economics of the Getúlio Vargas Foundation (Ibre-FGV) and the Brazilian Institute of Ethics in Competition (Etco), when announcing 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.


 


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, by 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 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 underground 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. The fact that the crisis did not shake the advance of the underground economy last year also caught the attention of researchers. Ibre / FGV researcher Samuel Pessoa explained that the decline in the supply of credit was one of the most damaging consequences of the global crisis within the formal economy, in the last quarter of last year. "But it hardly affected the shadow economy, because it doesn't use credit."