Underground Economy Index confirms downward movement

By ETCO
24/07/2014

The Underground Economy Index (IES), released at the end of May by ETCO together with the Brazilian Institute of Economics of the Getúlio Vargas Foundation (FGV / IBRE), reached the mark of 16,2%, a reduction of 0,6 point percentage over the previous year. This percentage resulted from the introduction of PNAD Continuous data in the calculation of the index and which were also applied to correct the 2012 index.

In absolute values, the estimate is that the underground economy - the production of goods and services not reported to the government, which is outside the national GDP - exceeds the R $ 782 billion mark in 2013.

“The use of Continuous PNAD confirms the fall of the underground economy in the country, which we have been pointing out since the beginning of the historical series of the IES, in 2003”, comments the researcher from FGV / IBRE, Fernando de Holanda Barbosa Filho. This is because, according to him, the fall is even more relevant when the data from more than 5 small municipalities of the Continuous PNAD is incorporated, compared to the 3,5 of the previous PNAD. “Historically, formality is stronger in large centers, and this result shows that it is also spreading to small municipalities, even though the economy is no longer as vigorous. It is what I usually call the country's institutional improvement ”, explains Barbosa Filho.

Driven by access to credit, both for employers and for employees, who are forced to formalize their activities in order to obtain financing, the drop in informality may also be rooted in tax breaks for some sectors of the economy.

“As well as the tax exemption, other factors, such as the expansion of the use of the Electronic Invoice, the de-bureaucracy of tax processes and the policies directed at small entrepreneurs (MEI, Simples Nacional), show the importance of public policies to contain informality” , says ETCO's executive president, Evandro Guimarães. "Measures like these certainly have a lot of value in balancing the economy, and should always be analyzed from the perspective of reflexes in the short, medium and long term."

What is certain is that informality brings direct losses to society, creates an environment of transgression, stimulates opportunistic economic behavior, with a drop in the quality of investment and a reduction in the growth potential of the Brazilian economy. In addition, it causes a reduction in government resources for social programs and investments in infrastructure.