Author: Camila Nobrega

Source: O Globo, 14/05/2009

RIO - The underground economy, which considers the sum of the production of goods and services that are outside official controls, grew 27,1% between December 2007 and December 2008. This is shown by the Underground Economy Index, ascertained by FGV under the order of the Brazilian Institute of Competition Ethics (Etco). This is the biggest growth recorded by the study, which began in 2003. In addition, between September and December, during the worsening of the economic crisis, the increase in the underground economy was 9,5%. In relation to the Brazilian GDP, which shrank 3,6% in the same period, the underground economy grew 13,6% more.

According to economist Fernando de Holanda, coordinator of the research, the crisis hit the formal economy completely, but, at least until December, it did not affect the underground economy. He points out that the credit crisis does not affect economic activity not included in official accounts:

_ The need for credit is an incentive to formality. But, in the absence of it, companies may have chosen to postpone the payment of taxes, for example, including for the sake of surviving the crisis. This is a perverse incentive in business logic.

According to the study, the tax burden was the main component of incentives for the underground economy, registering a contribution of 55% in the calculation of its growth. All other factors analyzed in the survey, which includes economic activity (measured by the level of employment), corruption and exports, contributed positively to the increase in the index. Still according to Fernando de Holanda, the high collection stimulates informality and tax evasion:

_ The objective of the research is to provide information for the creation of public policies. Based on the results, the reduction of the tax burden would be essential for the decrease in the underground economy.